Intrinsic value of Full House Resorts - FLL

Previous Close

$2.47

  Intrinsic Value

$1.86

stock screener

  Rating & Target

sell

-25%

  Value-price divergence*

-76%

Previous close

$2.47

 
Intrinsic value

$1.86

 
Up/down potential

-25%

 
Rating

sell

 
Value-price divergence*

-76%

*Intrinsic value change (in %) minus stock price change (in %) in the past 12 months.

We calculate the intrinsic value of FLL stock by summing up the current values of future distributable cash flows generated by the company and dividing the sum by the number of outstanding shares. As such, the intrinsic value calculation depends entirely on projections. The more accurate your projections of the company's performance are - the more reliable is the intrinsic value calculation result. Please make sure to check the stock valuation input data below and adjust it if necessary. The quality of the output (intrinsic valuation result) is only as good as the quality of the input. See also DISCLAIMERS.

STOCK VALUATION INPUT DATA

Revenue (in 2016), $M
Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Variable cost ratio, %
Fixed operating expenses, $M
Interest rate on debt, %
Effective corporate tax rate, %
Production assets / Revenue, %
Life of production assets, yrs
Working capital / Revenue, %
Revenue / Adjusted assets
Adjusted equity ratio
Cash flow adjustment, % of Revenue
Book value of equity, $M
Shares outstanding, mln
Market capitalization, $bln 0.1

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
2016(a)
   2017
   2018
   2019
   2020
   2021
   2022
   2023
   2024
   2025
   2026
   2027
   2028
   2029
   2030
   2031
   2032
   2033
   2034
   2035
   2036
   2037
   2038
   2039
   2040
   2041
   2042
   2043
   2044
   2045
   2046

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  16.80
  25.00
  23.00
  21.20
  19.58
  18.12
  16.81
  15.63
  14.57
  13.61
  12.75
  11.97
  11.28
  10.65
  10.08
  9.58
  9.12
  8.71
  8.34
  8.00
  7.70
  7.43
  7.19
  6.97
  6.77
  6.60
  6.44
  6.29
  6.16
  6.05
  5.94
Revenue, $m
  146
  183
  224
  272
  325
  384
  449
  519
  595
  676
  762
  853
  949
  1,050
  1,156
  1,267
  1,382
  1,503
  1,628
  1,758
  1,893
  2,034
  2,180
  2,332
  2,490
  2,655
  2,825
  3,003
  3,188
  3,381
  3,582
Variable operating expenses, $m
 
  173
  213
  257
  307
  362
  423
  489
  560
  636
  716
  800
  890
  985
  1,084
  1,188
  1,296
  1,409
  1,526
  1,648
  1,775
  1,907
  2,044
  2,187
  2,335
  2,489
  2,649
  2,816
  2,989
  3,170
  3,359
Fixed operating expenses, $m
 
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  1
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
Total operating expenses, $m
  140
  174
  214
  258
  308
  363
  424
  490
  561
  637
  717
  801
  891
  986
  1,085
  1,189
  1,297
  1,411
  1,528
  1,650
  1,777
  1,909
  2,046
  2,189
  2,337
  2,491
  2,651
  2,818
  2,991
  3,172
  3,361
Operating income, $m
  6
  8
  11
  14
  17
  21
  25
  29
  34
  39
  44
  52
  58
  64
  71
  78
  85
  92
  100
  108
  116
  125
  134
  144
  154
  164
  174
  185
  197
  209
  221
EBITDA, $m
  14
  19
  23
  29
  34
  41
  48
  56
  64
  73
  82
  92
  102
  113
  125
  137
  150
  163
  176
  190
  205
  221
  236
  253
  270
  288
  307
  326
  346
  367
  389
Interest expense (income), $m
  8
  9
  12
  15
  18
  22
  27
  32
  37
  42
  48
  55
  62
  69
  76
  84
  92
  101
  110
  119
  129
  139
  149
  160
  171
  183
  195
  208
  221
  235
  249
Earnings before tax, $m
  -4
  -1
  -1
  -1
  -1
  -2
  -2
  -2
  -3
  -4
  -4
  -3
  -4
  -5
  -5
  -6
  -7
  -9
  -10
  -11
  -12
  -13
  -15
  -16
  -18
  -19
  -21
  -22
  -24
  -26
  -28
Tax expense, $m
  1
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Net income, $m
  -5
  -1
  -1
  -1
  -1
  -2
  -2
  -2
  -3
  -4
  -4
  -3
  -4
  -5
  -5
  -6
  -7
  -9
  -10
  -11
  -12
  -13
  -15
  -16
  -18
  -19
  -21
  -22
  -24
  -26
  -28

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  27
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total assets, $m
  177
  188
  231
  280
  334
  395
  461
  533
  611
  694
  783
  877
  975
  1,079
  1,188
  1,302
  1,421
  1,544
  1,673
  1,807
  1,946
  2,091
  2,241
  2,397
  2,559
  2,728
  2,904
  3,087
  3,277
  3,475
  3,681
Adjusted assets (=assets-cash), $m
  150
  188
  231
  280
  334
  395
  461
  533
  611
  694
  783
  877
  975
  1,079
  1,188
  1,302
  1,421
  1,544
  1,673
  1,807
  1,946
  2,091
  2,241
  2,397
  2,559
  2,728
  2,904
  3,087
  3,277
  3,475
  3,681
Revenue / Adjusted assets
  0.973
  0.973
  0.970
  0.971
  0.973
  0.972
  0.974
  0.974
  0.974
  0.974
  0.973
  0.973
  0.973
  0.973
  0.973
  0.973
  0.973
  0.973
  0.973
  0.973
  0.973
  0.973
  0.973
  0.973
  0.973
  0.973
  0.973
  0.973
  0.973
  0.973
  0.973
Average production assets, $m
  112
  139
  171
  208
  249
  294
  343
  397
  454
  516
  582
  652
  725
  802
  883
  968
  1,056
  1,148
  1,244
  1,343
  1,447
  1,554
  1,666
  1,782
  1,903
  2,028
  2,159
  2,294
  2,436
  2,583
  2,737
Working capital, $m
  15
  -12
  -15
  -19
  -22
  -26
  -31
  -35
  -40
  -46
  -52
  -58
  -65
  -71
  -79
  -86
  -94
  -102
  -111
  -120
  -129
  -138
  -148
  -159
  -169
  -181
  -192
  -204
  -217
  -230
  -244
Total debt, $m
  102
  130
  164
  203
  246
  294
  347
  404
  466
  532
  602
  676
  755
  837
  923
  1,013
  1,108
  1,206
  1,308
  1,414
  1,524
  1,639
  1,758
  1,882
  2,011
  2,144
  2,284
  2,429
  2,579
  2,737
  2,900
Total liabilities, $m
  121
  149
  183
  222
  265
  313
  366
  423
  485
  551
  621
  695
  774
  856
  942
  1,032
  1,127
  1,225
  1,327
  1,433
  1,543
  1,658
  1,777
  1,901
  2,030
  2,163
  2,303
  2,448
  2,598
  2,756
  2,919
Total equity, $m
  56
  39
  48
  58
  69
  82
  95
  110
  127
  144
  162
  181
  202
  223
  246
  269
  294
  320
  346
  374
  403
  433
  464
  496
  530
  565
  601
  639
  678
  719
  762
Total liabilities and equity, $m
  177
  188
  231
  280
  334
  395
  461
  533
  612
  695
  783
  876
  976
  1,079
  1,188
  1,301
  1,421
  1,545
  1,673
  1,807
  1,946
  2,091
  2,241
  2,397
  2,560
  2,728
  2,904
  3,087
  3,276
  3,475
  3,681
Debt-to-equity ratio
  1.821
  3.340
  3.430
  3.500
  3.560
  3.600
  3.630
  3.660
  3.680
  3.700
  3.710
  3.730
  3.740
  3.750
  3.750
  3.760
  3.770
  3.770
  3.780
  3.780
  3.780
  3.790
  3.790
  3.790
  3.800
  3.800
  3.800
  3.800
  3.800
  3.800
  3.810
Adjusted equity ratio
  0.193
  0.207
  0.207
  0.207
  0.207
  0.207
  0.207
  0.207
  0.207
  0.207
  0.207
  0.207
  0.207
  0.207
  0.207
  0.207
  0.207
  0.207
  0.207
  0.207
  0.207
  0.207
  0.207
  0.207
  0.207
  0.207
  0.207
  0.207
  0.207
  0.207
  0.207

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -5
  -1
  -1
  -1
  -1
  -2
  -2
  -2
  -3
  -4
  -4
  -3
  -4
  -5
  -5
  -6
  -7
  -9
  -10
  -11
  -12
  -13
  -15
  -16
  -18
  -19
  -21
  -22
  -24
  -26
  -28
Depreciation, amort., depletion, $m
  8
  11
  13
  15
  17
  20
  23
  26
  30
  34
  38
  40
  44
  49
  54
  59
  65
  70
  76
  82
  89
  95
  102
  109
  117
  124
  132
  141
  149
  158
  168
Funds from operations, $m
  10
  10
  12
  14
  16
  18
  21
  24
  27
  30
  34
  37
  41
  45
  49
  53
  57
  62
  67
  71
  77
  82
  87
  93
  99
  105
  112
  118
  125
  133
  140
Change in working capital, $m
  2
  -2
  -3
  -3
  -4
  -4
  -4
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -9
  -10
  -10
  -10
  -11
  -11
  -12
  -12
  -13
  -13
  -14
Cash from operations, $m
  8
  12
  15
  17
  20
  22
  26
  29
  32
  36
  39
  43
  47
  52
  56
  60
  65
  70
  75
  80
  86
  91
  97
  103
  110
  116
  123
  130
  138
  146
  154
Maintenance CAPEX, $m
  0
  -7
  -9
  -11
  -13
  -15
  -18
  -21
  -24
  -28
  -32
  -36
  -40
  -44
  -49
  -54
  -59
  -65
  -70
  -76
  -82
  -89
  -95
  -102
  -109
  -117
  -124
  -132
  -141
  -149
  -158
New CAPEX, $m
  -4
  -28
  -32
  -36
  -41
  -45
  -49
  -54
  -58
  -62
  -66
  -70
  -73
  -77
  -81
  -85
  -88
  -92
  -96
  -100
  -103
  -108
  -112
  -116
  -121
  -125
  -131
  -136
  -141
  -147
  -153
Cash from investing activities, $m
  -29
  -35
  -41
  -47
  -54
  -60
  -67
  -75
  -82
  -90
  -98
  -106
  -113
  -121
  -130
  -139
  -147
  -157
  -166
  -176
  -185
  -197
  -207
  -218
  -230
  -242
  -255
  -268
  -282
  -296
  -311
Free cash flow, $m
  -21
  -22
  -26
  -30
  -34
  -38
  -42
  -46
  -50
  -54
  -58
  -62
  -66
  -70
  -74
  -78
  -82
  -87
  -91
  -95
  -100
  -105
  -110
  -115
  -120
  -126
  -132
  -138
  -144
  -151
  -158
Issuance/(repayment) of debt, $m
  -2
  30
  34
  39
  43
  48
  53
  57
  62
  66
  70
  74
  78
  82
  86
  90
  94
  98
  102
  106
  110
  115
  119
  124
  129
  134
  139
  145
  151
  157
  164
Issuance/(repurchase) of shares, $m
  5
  9
  10
  11
  13
  14
  16
  17
  19
  21
  23
  22
  24
  26
  28
  30
  32
  34
  36
  39
  41
  43
  46
  49
  51
  54
  57
  60
  63
  67
  70
Cash from financing (excl. dividends), $m  
  33
  39
  44
  50
  56
  62
  69
  74
  81
  87
  93
  96
  102
  108
  114
  120
  126
  132
  138
  145
  151
  158
  165
  173
  180
  188
  196
  205
  214
  224
  234
Total cash flow (excl. dividends), $m
  12
  16
  18
  20
  22
  24
  27
  29
  31
  33
  35
  35
  36
  38
  40
  42
  44
  46
  47
  49
  51
  53
  55
  58
  60
  62
  65
  67
  70
  73
  76
Retained Cash Flow (-), $m
  1
  -9
  -10
  -11
  -13
  -14
  -16
  -17
  -19
  -21
  -23
  -22
  -24
  -26
  -28
  -30
  -32
  -34
  -36
  -39
  -41
  -43
  -46
  -49
  -51
  -54
  -57
  -60
  -63
  -67
  -70
Prev. year cash balance distribution, $m
 
  25
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash flow adjustment, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash available for distribution, $m
 
  32
  8
  9
  10
  10
  11
  11
  12
  12
  12
  12
  12
  12
  12
  12
  12
  11
  11
  11
  10
  10
  9
  9
  8
  8
  8
  7
  7
  6
  6
Discount rate, %
 
  8.80
  9.24
  9.70
  10.19
  10.70
  11.23
  11.79
  12.38
  13.00
  13.65
  14.33
  15.05
  15.80
  16.59
  17.42
  18.29
  19.21
  20.17
  21.18
  22.24
  23.35
  24.52
  25.74
  27.03
  28.38
  29.80
  31.29
  32.85
  34.50
  36.22
PV of cash for distribution, $m
 
  30
  7
  7
  6
  6
  6
  5
  5
  4
  3
  3
  2
  2
  1
  1
  1
  1
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Current shareholders' claim on cash, %
  100
  77.9
  61.9
  50.0
  40.9
  33.9
  28.3
  23.9
  20.3
  17.4
  15.0
  13.2
  11.6
  10.3
  9.1
  8.1
  7.3
  6.5
  5.8
  5.2
  4.7
  4.2
  3.8
  3.5
  3.1
  2.8
  2.6
  2.3
  2.1
  1.9
  1.8

Full House Resorts, Inc. owns, operates, develops, manages, and/or invests in casinos and related hospitality and entertainment facilities. The company owns and operates the Silver Slipper Casino & Hotel in Hancock County, Mississippi, which has approximately 37,000 square feet of gaming space with 955 slot machines, 29 table games, and live keno on the Gulf Coast, as well as a fine dining restaurant, a buffet, a quick-service restaurant, and two casino bars. It also owns and operates the Rising Star Casino Resort located in Rising Sun, Indiana, which has approximately 40,000 square feet of casino space, including 944 slot and video poker machines, and 25 table games; 190-room hotel; a leased 104-room hotel; 5 dining outlets; and an 18-hole Scottish links golf course. In addition, the company owns and operates Stockman’s Casino in Fallon, Nevada that has approximately 8,400 square feet of gaming space with 235 slot machines, 4 table games, and a keno. Further, it operates the Grand Lodge Casino at the Hyatt Regency Lake Tahoe Resort, Spa & Casino in Incline Village, Nevada on the north shore of Lake Tahoe that covers approximately 18,900 square feet of casino space featuring 255 slot machines and 20 table games, including a poker room. Full House Resorts, Inc. was founded in 1987 and is based in Las Vegas, Nevada.

FINANCIAL RATIOS  of  Full House Resorts (FLL)

Valuation Ratios
P/E Ratio -11.3
Price to Sales 0.4
Price to Book 1
Price to Tangible Book
Price to Cash Flow 7.1
Price to Free Cash Flow 14.1
Growth Rates
Sales Growth Rate 16.8%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -63.6%
Cap. Spend. - 3 Yr. Gr. Rate -7.8%
Financial Strength
Quick Ratio 14
Current Ratio 0.1
LT Debt to Equity 178.6%
Total Debt to Equity 182.1%
Interest Coverage 1
Management Effectiveness
Return On Assets 3.1%
Ret/ On Assets - 3 Yr. Avg. -2.3%
Return On Total Capital -3.5%
Ret/ On T. Cap. - 3 Yr. Avg. -6.6%
Return On Equity -8.8%
Return On Equity - 3 Yr. Avg. -13.8%
Asset Turnover 0.9
Profitability Ratios
Gross Margin 45.2%
Gross Margin - 3 Yr. Avg. 44.9%
EBITDA Margin 8.2%
EBITDA Margin - 3 Yr. Avg. 3.5%
Operating Margin 4.1%
Oper. Margin - 3 Yr. Avg. -1.7%
Pre-Tax Margin -2.7%
Pre-Tax Margin - 3 Yr. Avg. -7.5%
Net Profit Margin -3.4%
Net Profit Margin - 3 Yr. Avg. -7.2%
Effective Tax Rate -25%
Eff/ Tax Rate - 3 Yr. Avg. 9.8%
Payout Ratio 0%

FLL stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the FLL stock intrinsic value calculation we used $146 million for the last fiscal year's total revenue generated by Full House Resorts. The default revenue input number comes from 2016 income statement of Full House Resorts. You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.

Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
    We use three input parameters to forecast the revenue growth rate in our FLL stock valuation model: a) initial revenue growth rate of 25% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 8.8%, whose default value for FLL is calculated based on our internal credit rating of Full House Resorts, is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of Full House Resorts.
    By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.

Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of FLL stock the variable cost ratio is equal to 95.2%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $1 million in the base year in the intrinsic value calculation for FLL stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 9.1% for Full House Resorts.

Corporate tax rate of 27% is the nominal tax rate for Full House Resorts. In reality, companies find ways to pay much less taxes than that or not to pay them at all.

Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the FLL stock is equal to 0%.

Production assets are the company's assets used for manufacturing products or provision of services. In the valuation model input table they are expressed as a percentage of revenue and for FLL are equal to 76.4%.

Life of production assets of 16.3 years is the average useful life of capital assets used in Full House Resorts operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.

Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for FLL is equal to -6.8%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $56 million for Full House Resorts - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.

Shares outstanding of 22.361 million for Full House Resorts is needed to calculate the intrinsic value of one share.

Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of Full House Resorts at the current share price and the inputted number of shares is $0.1 billion.

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COMPANY NEWS

▶ Full House Resorts Announces Solid Second Quarter Results   [Aug-14-17 04:05PM  GlobeNewswire]
▶ Grand Lodge Casino Further Elevates Guest Experience   [Jun-30-17 03:00PM  GlobeNewswire]
▶ Full House Resorts Announces First Quarter of 2017 Results   [May-10-17 04:05PM  GlobeNewswire]
▶ 10-Q for Full House Resorts, Inc.   [Aug-15  08:10PM  at Company Spotlight]
Stock chart of FLL Financial statements of FLL
Valuation of Stocks

The paper VALUATION OF STOCKS: The Quest for Intrinsic Value provides a detailed description of our valuation model and discloses the calculation algorithm.

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