Churchill Downs Stock Could Wring Benefits from Richmond Casino
Posted on: June 15, 2023, 12:53h.
Last updated on: June 15, 2023, 01:03h.
Churchill Downs’ (NASDAQ: CHDN) stock could get a decent boost should the operator prove successful in its effort to bring a casino hotel to the Virginia capitol of Richmond.
Churchill and partner Urban One are angling for a second referendum on the matter after a similar effort was narrowly defeated in 2021.
On June 13, 2023, Churchill Downs Incorporated’s 50/50 partnership with Urban One, Inc., RVA Entertainment Holdings, LLC, entered into a Resort Casino Host Community Agreement with the City of Richmond, Virginia (the “City”), to be the City’s preferred casino gaming operator subject to certification by the Virginia Lottery Department and a local referendum. The planned project is a $562 million world-class entertainment and gaming venue,” according to a Form 8-K filing with the Securities and Exchange Commission (SEC).
Churchill and Urban One officials estimate the gaming venue would generate $30 million in annual tax revenue and create thousands of good-paying jobs.
Tangible Potential Benefits for Churchill Downs Investors
Should the Richmond casino come to life, Churchill and Urban One will share in the economic perks, some of which will flow through to the former’s investors.
In a Wednesday note to clients, Wells Fargo analyst Daniel Politzer estimated that the casino hotel in the Virginia capitol could provide upside of $2 to $3 to Churchill’s share price. The Richmond plan is one of roughly 10 in Churchill’s product pipeline that Politzer forecasts could add $300 million in earnings before interest, taxes, depreciation, and amortization (EBITDA) over time. That’s a 30% increase from current levels.
The analyst rates the stock “overweight” with a $155 price target. Of course, the Richmond casino has to come to life for investors to benefit, and there are no guarantees that will.
Some Virginia policymakers argue that the results of the 2021 referendum should stand and that it would be undemocratic to attempt the vote just two years after the fact. Conversely, supporters believe that Urban One and Peninsula Pacific Entertainment didn’t do an adequate job of informing voters about the benefits of a gaming venue. Churchill acquired Peninsula Pacific’s assets last year for $2.5 billion.
Some Virginia political observers believe the vote could be different a second time around simply because Churchill Downs has brand recognition Peninsula Pacific lacked.
Churchill Downs Other Projects
As noted above, Churchill has other irons in the fire beyond the Richmond casino plan. Those include the $200 million paddock enhancement at its eponymous racetrack in Kentucky, which is part of a broader $300 million plan to modernize that venue.
Beyond Richmond, the operator’s product pipeline includes plans for two other new gaming venues in Virginia as well as in Indiana and Kentucky. Churchill is established in Virginia through its ownership of six Rosie’s Gaming Emporium venues.
Currently, Churchill operates 12 casinos with more than 14K gaming machines and 300 table games across 10 states.
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Source: casino.org
