Inclement Weather, Recession Shouldn't Stop Great Canadian Gaming

In a sure sign that recession has struck, spending in Las Vegas has plunged, which is stacking the odds against casino operator Great Canadian Gaming Corp. (GCGMF.PK). The weather isn't helping either.

Earnings at B.C.-based Great Canadian are set to take a hit this year as a poor North American gambling environment has been exacerbated in British Columbia by unusually cold weather and snow, according to analyst Andy Nasr of Raymond James.

Table-driven revenues as well as slot-machine income are expected to be trimmed because of the inclement conditions, which combined with the seemingly equally harsh demand destruction for BlackJack these days, has prompted the analyst to shave his EBITDA estimate for 2009 by more than 12% to C$112-million and revise his price target on the stock to C$12 from C$15.

With "operations [that] depend largely on visitations," a string of snow storms that have wreaked a havoc from Chilliwack to Kamloops, B.C., "does not bode well" for Great Canadian, which derives 70% of earnings from its home province.

Still, with the stock trading south of C$4 these days, Mr. Nasr still holds a "strong buy" rating on Great Canadian, and continues to "believe that the current stock price represents exceptional value for long-term oriented investors."

Comments

[Rolling Wave:]

It will have to be a very long term perspective for any growth. Canadian is dumping staff quickly, offering packages. Likelihood is more consolidation, even forced sales....

Jan 15 11:16 PM