RE:RE:RE:How Much is Gamehost Worth Today?Thelongview wrote: Hi Malx1. My $1 test did not mean to offend you or the Company.
I can understand what you are saying and can imagine the psychological impact that GH shareholders have gone through and I can appreciate your comments from your following statement:
With that said, in defense of GH's share price performance, 2011 to 2019 the years you examined, we must also look at the "Mental Health" and "Financial Health" of investors who participated in the Energy sector, and Alberta-based businesses.
Even though AB was not enjoying a robust economy - to say the least - after the collapse of oil that started in June 2014 and ended in January 2015 and with US shale continuing to make life very difficult for our oil companies, GH nonetheless posted quite spectacular financial results all the way up to the pandemic.
millions 2015 2016 2017 2018 2019
Revenues $77.4 $67.3 $68.2 $70.4 $68.1
Free cash flow $22.7 $19.2 $19.4 $19.4 $19.3
Net debt $15.2 $16.5 $12.6 $26.6 $31.6
Shares outs 24.7 24.7 24.7 24.3 24.3
ROE 20.9% 16.1% 16.7% 16.7% 17.5%
The above results are quite spectacular in any economic environment and especially in a weak one.
While AB investors may not have wanted to add more capital to their GH investment, the number of investors in Canada is quite large and they also have chosen not to invest, but for a different reason.
The other investors did not see the capital being used in a way to promote growth. Growth does not have to come by solely opening more casinos – which at the time the AGLC was not permitting – and can be achieved in a few different ways of which none have to do with buying or expanding casinos or building restaurants on land owned as this would still depend on attracting more people that are living in a difficult economic climate.
Growth can come from other areas. Other companies have had very difficult economic climates to operate in for an extensive period of time and have found ways to grow but the will must be there. I have even invested in one such company that had a difficult operating climate but was able to think differently and find a unique – at the time I thought it was and I still think so – way to increase shareholder returns that is not above GH from doing and will write a post about this in a few weeks, as time does not permit right now.
I remember seeing GH stock in the past. In fact, I looked at the business every two years. I had and still have the habit of looking at each public company in Canda and do so every two years. I start with the A’s and finish with the Z’s. May sound ridiculous to some but not if you’re a private investor that makes your living from investing as I don’t get a paycheque from any other source.
I always took a pass on GH from a lack of growth. I liked the business but there were always better investments that would compound at a higher rate that were well priced. I have friends that are currently still in the industry and they felt the same way about GH, at the time. This is a concern for more investors than you think and it is reflected in the valuation.
I have a love for GH stock. Great operations. Excellent financials. Management that operates the Company in a very efficient manner. Strong competitive advantage (and this is the reason they did so well from 2015 – 2019 even though AB did not.)
The one weakness I point out is on capital allocation. Unfortunately, this is the one area that Bay Street is focused on. It is also the one area that all serious investors focus on. The lack of growth will continue to make GH trade at a discount, until it changes. If it changes, GH’s under-appreciated value will surface and possibly trade at a premium – even likely.
Again, I do understand your point of view and I would 100% agree with you if the only investors allowed to buy GH stock were people that were in the provinces affected by the collapse of oil but that is not the case. Investors in other provinces and territories, and Nukester – I say we add either another province or territory and call it Nukester, with a population of one (Nukester), that would be cool, saying you live in Nukester, Canada :) – as I was saying investors in other provinces or territories were able to buy GH stock but did not, even with the large discount to fair value.
The pandemic brought GH to the attention of other investors. Investors who want growth but were stilling wanting to buy GH because of its ridiculous discount to fair value. Special situation investing as I call it. But these investors, at that point already having purchased the stock and planning on holding and eventually selling it at a small discount to intrinsic value, saw something that nobody else could see.
They saw that if growth could be added to GH, then it could not only reach intrinsic value, but continue to rise as intrinsic value would be rising as well.
I repeat, if growth can be added to GH, and I’m not talking about adding restaurants, a wider audience will take notice and the stock will finally start to perform.
How many fans will you put in the arena if you play 40 games and always win 10 of those games and lose 30 games? Not many. Over time those fans will just stop coming to the arena. Now let’s say you are still making a profit even with the bad records. How much money is left to invest in your scouting system and your development system if you pay almost all of that profit out as a dividend to your owners? Not much. You will remain a losing team and eventually when bad management comes (as no management lives forever) economic disaster will happen to you.
Putting money in a scouting system will allow you to find Wayne Gretzky, Paul Coffey, Mark Messier, etc. The wins will come. The fans will pack your arena. Merchandise will be sold. Profits will rise. Growth in wins was needed to achieve growth in profitability. Now you don’t need to win 5 Stanley Cups in a row to make money or have players of the caliber of the Great One. You only need to focus on getting more wins and fans will come to your arena. Growth in wins = growth in fans.
If GH can grow instead of reverting back to paying out most of its cash via dividends, more professional investors, market professionals and other investors from all provinces and territories including our newest one - Nukester - will take notice and a rerating of the stock will be had.
A one-time big dividend increase will result in a pop in stock price, for sure, but then a slow trickle down, as was the case with the current .36 dividend back when it was announced. Sure, .60 .72 in dividends would result in a 6.7% to 8% dividend yield at a $9.00 stock price but that is not out or the ordinary in today's environment:
BCE: 7.6%
Bank of Nova Scotia: 7.7%
The Keg: 9.1%
Transcontinental: 8.6%
Enbridge: 8.0%
Fierra Capital: 19.8% even if it cuts in half it’s still high
Power corporation: 6.5% and
I go on with the list for a long-time. Some of the stocks mentionned and some not mentionned even have growth - very decent growth - that allow for yearly increses in dividends and so why limit GH to compete with other stocks that offer a higher yield, an annually growing and some growth on top of that.
If GH can grow, in a different manner, which I can explain in a future post, they will trade at a much higher valuation. Just paying out a larger dividend will not re-rate the stock to any significant degree.
All excellent points.
No offense taken, not at all.
Really enjoy the discussion and I think it's beneficial to all of us.
While I agree that investment professionals see no-growth or slow-growth as a reason to avoid GH, the average mom & pop investor does not.
There are those who scan through the list of high-yield securities and seek slow-steady, predictable income producers. That is where GH has landed because of the nature of its environment. Respectable, but not exciting enough to get much attention from "crowds" of money.
What is not discussed is that the business still reviews opportunities to grow. A small example is the tuck-in of the 9% Deerfoot stake that remained outstanding the Spring of 2022. We have to be waiting in the weeds for possible growth opportunities. Hi-quality assets don't change hands very often, and when they do, the seller is asking for a premium.
The last man standing..............................................
I look at our two "Growth" style casino operators in Canada, Gateway and Great Canadian.
Gateway was purchased in 2007. Had they been public during 2008 credit crisis, they would have faced bankruptcy.
Great Canadian almost went bankrupt during the credit crisis.
GC eventually was bought out, we know, during the Great Pandemic Panic, at a hefty discount to its fair value, maybe 50% or so.
Gamehost, being the conservative, steady, unleveraged little brother of the two; GH was riding out the recession with its regional operations and small debt load.
Even though there was more money to be made with GC and GCI.un, an astute investor who respects their capital, their money would have found its way to GH.un.
And here we are.
Gateway still has billion dollar debt problems, and Great Canadian could be bogged down with their mega Ontario acquisitions and the associated debts.
Bigger not always better. However, would be nice to see GH a little bigger one day. Find a way to get to the $500mm market cap territory. I'd like to see that.
And we don't know what we don't know. Maybe we merge, maybe we find a suitable company to partner with, maybe pull a T. Boone Pickens and make a bid for Gateway. But we'd need to clone Darcy and Elston for that.
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Rambling a little. But my main point is this.
Alberta and its people are unfairly judged and criticized by others countrywide.
I know why, because I've worked and lived in different towns across BC and done business in other provinces.
People associate Alberta with resources and money. People are inherently jealous of others they deem prosperous. Not all, but many. People I've worked for, I've seen their reaction to the word Alberta. The same reaction you see when suckers at Kasking's poker game are dealt unsuited 7-2. Sour milk face.
When you have a collective, unspoken, dislike for a province and its businesses, that's a bias. And my point is simply that a bias will hurt the valuation of GH and other Alberta businesses until that bias fades.
One way to slap lazy onlookers back to reality is to announce a dividend increase. When they least expect it. They arrive to their trade desk, and the stock has rallied 30% as soon as the first 100 shares trades. "GAP UP" style.
Maybe we jump to $11+, maybe we sit there for a while, but the onlookers start to pay more attention and the FOMO eventually kicks in.
I've been waiting for the Gamehost Gap-up since spring of 2021.
One spring, or fall or winter, I'll see it.
Just as I've seen it with many other hi-quality forgotten stocks.
Logistec of Montreal, largest Shareholders were the CEO and her 2 sisters.
When it happens, that's when it happens.
