This analysis is part of a review that we are conducting at MORAM Capital of 8 companies for which we have published some Long/Short analysis in the past two years and which have undergone significant changes in recent months. The goal is to determine which of these 8 companies are worth having some form of exposure (Long/Short) or through derivatives, and which ones are better to avoid.
The sole purpose is educational—to replicate the process we carry out in investment funds—and it should never be considered an investment recommendation
Full House Resorts
Full House is a small regional casino company with a market cap of $180 million, which we analyzed earlier this year in January. It caught our attention because, after several years of construction, they were opening their two flagship assets (The American Place – currently a temporary opening – and Chamonix) within just over 10 months.
The company was also in a particular situation because these casinos were expected to multiply their EBITDA by five in just three years (from $20 million to $100 million), which was more than necessary given their high debt of $450 million (8.25% bond28) due to the Capex required for the construction of both assets (plus $325 million to transition the American Place from temporary to permanent in 2027)
In other words, it was not rocket science that if the new casinos perform well, the equity should appreciate significantly due to the company’s leverage.
Unfortunately, in the first few weeks after Chamonix’s opening, we saw several early-indicators that the launch was a disaster, so we exited without much fanfare (the stock has been practically flat since last November).
Now, more than half a year later, the situation has evolved considerably at both Chamonix and The American Place, with the stock price remaining the same as at the beginning of the year. This is why we think that before looking for new companies, this is one we should thoroughly review to see if there is an opportunity (and how to gain exposure if that’s the case), or if, on the contrary, the risks outweigh the benefits and we should look for more interesting opportunities.