Gamehost Inc T.GH

Shoot for the Stars, land on the Moon...

[malx1]

Revenues:   $20mm would have been exceptional, $19mm would have been quite respectable. 

Costs of doing business:  Wages, Utilities, Interest, Food & Bev, Entertainment, Security keeping an eye on professional gamblers (Kasking), all more expensive; higher costs across the board are pulling down EBITDA margins. 

Profitability metrics matter.  The higher the margin, the more profit will be retained by the business on behalf of shareholders.

For some perspective, back in 2014 we would see EBITDA margins around 45%.  Today we are working hard to achieve EBITDA margins of 35%.  Lower margins mean less money for Share Buybacks, Debt Reduction and Dividends.  (order of importance)


Was out with the dog.  He faces a variety of daily choices. learning from them.  Some good, some not good.  Over time he has figured out that good choices are acknowledged with treats. 

Companies have choices to make too.  As GH enters the Endemic, we can see that the company has chosen the path of long-term value creation rather than short-term shareholder gratification. 

We are closing in on debt targets.  We are watching the share count melt away.  We are positioning the company to increase dividends. 

My guess is that as GH battles inflation from all directions, the company is currently running at an annualized Payout Ratio of approximately 60% with the current $0.36/yr dividend.

We all want more money paid monthly, yes, I get that.  But there are periods of time in business when it makes better sense to utilize money internally than to distribute maximized payments to shareholders. 

The recent investments into each of the 3 casinos were exceptionally clever when viewed in rear-view mirror.  The world shut down for two years, people were told to stay home.  When's the best time to conduct renovations at a Casino?  Yes, when it is forced to close its doors. 

When's the best time to buy your shares back through NCIB?  Yes, when they are discounted in the market for a myriad of reasons.

When's the best time to increase the dividend?  Yes, when shares are closer to FMV around $12 and after debt targets have been met.


That brings us back to choices.  Investors used to flock to the high-yield stocks and bonds when interest rates were low.  Now that interest rates have normalized, Grandpa can go to the bank and buy some GICs yielding 5%; he may not want Banks, Pipelines and Gamehost shares because share price volatility causes him to lose sleep. 

GH is not obligated to pay $0.72/yr but the capital allocation decisions they are making today, and made over the past few years, are positioning the business for inevitable dividend growth.

Some shareholders may not want to wait, that's understandable.  The 5% GIC is calling and they seek certainty of returns.  Nobody will blame them for that, especially the fancy customers of Silicon Valley Bank.


So with all that said, I was expecting to see the share price at $8.88 today rather than $7.88.  But we cannot control external events that impact our capital markets.  Fragility of US regional banks will cause many to reduce their risk appetite.  Stocks are currently out of favour. 

There are positives that are worth paying attention to:
- Commodity prices moderating
- US Regional Bank Panic will suspend interest rate hikes
- Consumers are rebuilding their balance sheets
- Alberta is positioned to provide opportunity to those moving there
- GH remains very profitable when compared to its peers through this period of Inflation Flu

While those of us still hanging in there deserved a dividend hike and a share price rally, we got some popcorn and a pat on the back.  Keep your head up.  This Q4 was better than expected, and we see that the Team and BOD continue to make good choices on behalf of all shareholders. 


Seems I owe a few beers... 

The footnotes of the wager stipulated Happy Hour at Wildhorse.

For our American friends and out of town friends, it's much easier to send $5.50cdn by e-transfer.


Inflation is when 1 GH share buys 1 beer.

Bull Markets are when 1 GH shares buys 3 beers.

Takeover premiums are when 1 GH share buys 4 beers.


Cheers gang

[cpeczek]

It says something that it didn't sell off 5% today when there is so much panic in the markets.  I hope that the Fed's have controlled the fallout on banks that bet big on VC and crypto and it won't make much impact. The easing commodity prices and fallout of this I think means we will see interest rates level off very quickly. We might be back to another bull market before we

[malx1]

You're right cpeczek.     If regional bank fallout is contained, consumers will keep spending.