How Election Day Could Boost Penn National Gaming

Revenue for Penn National Gaming Inc. (NASDAQ:PENN) in Q3 slowed (see conference call transcript), as it did at most casino operations. But due to the termination of an attempted acquisition deal, the company received a settlement of a cool $225 million. In addition, the (intended) acquisition group purchased 12,500 shares of Series B Redeemable Preferred Stock due 2015 for $1.25 billion.

As a result, Penn reported a net income of $147.5 million. That’s $100.9 million more than the same quarter last year.

Currently, Penn operates 19 facilities in 15 jurisdictions. With this influx of cash, the company has declared itself ready to expand.

Waiting for November 4

Thanks to huge budget deficits, the State of Maryland is reconsidering its former stance on slot machines. This election day, my fellow Marylanders are likely to approve a referendum that would open the state for slots.

Penn has indicated interest in contracts to run slots facilities in Maryland. If the referendum to permit the five proposed sites is passed, the company will be ready to move on the bidding process.

Priced around $20, Penn had seen a 52-week high of $62.25. And with a P/E of 6.5, this company holds promise.

Disclosure: none

Comments

[Fam62c:]

Also keep in mind that they just closed the termination deal and added another 775 million in cash to the balance sheet. An interest free Billion dollar cash injection from the preferred shares is a nice thing to have in an environment where it's very difficult to raise cash. Penn is positioned to survive and thrive.

2008 Nov 02 11:26 AM

[Dan Weiss:]

As much as I like Penn Gaming the likely news from Maryland is a significant negative (along with Ohio). The majority of Penn's flows come from West Virginia and Pennsylvania and an approval will likely cut into the profits of the company over time.

2008 Nov 02 05:41 PM

[J. Christop...:]

Well Dan, looks like the folk in Maryland suprised you. The slots referendum passed (with a 59% majority!).

2008 Nov 05 03:07 PM