Home > Boards > US Listed > Gaming and Casinos > Asia Entertainment & Resources (AERL)

Stern Aegee lowers Q1 earnings estimate to .40 5/9/2012

Public Reply | Private Reply | Keep | Last ReadPost New MsgNext 10 | Previous | Next
realfast95 Member Profile realfast95 Member Level 
Thursday, May 10, 2012 6:33:25 AM
Re: None Post # of 509 
Stern Aegee lowers Q1 earnings estimate to .40 5/9/2012
http://ir.aerlf.com/analystreports.cfm

Asia Entertainment & Resources Ltd.
Lowering ests to match published monthly results; Reiterate
Co’s attributes overlooked; Quantifying one NT catalyst
Buy
AERL
Price $5.08
Price Target $22.50
Our Call
We lower AERL’s 1Q12E EPS to $0.40 from $0.44. CY12/CY13 goes to $1.97/
$2.68 from $2.06/$2.69. Changes reflect AERL's published monthly rolling chip
volume, negatively impacted by hold two months during 1Q12, as well as slightly
higher modeled commissions to its junket operators to be conservative. Given
AERL releases its turnover monthly, we believe our adjustments should not come
as a surprise.
AERL’s 1Q12 monthly chip turnover ended at ~+32% YoY, comfortably higher
than its +25% full-year guidance. AERL currently trades for 2.6x/1.9x CY12/
CY13 EPS. Cash per share is over $3.20 (based on where CY11 cage capital
ended and our projections for monthly cash flow generation, less credit lines from
Macau casino partners, less its recent dividend to shareholders and King’s Gaming
acquisition payment). We continue to believe that AERL’s equity multiple will
increase as NT catalysts come to fruition, and as investors continue to diligence
the Company’s transparency and management commitment measures taken to
differentiate it from other small caps, including other Asian-based ones.
Outside of publishing its rolling chip volume on a monthly basis and paying a
semi-annual cash dividend - yield of which surpasses any in our coverage universe
(CY12/CY13 divi yield currently 5.4%/6.1%) - we note transparency measures
are also coupled with management’s financial commitment, which is overlooked
in our view. AERL’s founder/chairman as well as its COO have loaned the
Company $30m each ($60m total at no interest, expires April 2014). The loans are
convertible at $20 a share, a ~294% premium to today’s close and are callable at
$20 should shares trade above $25 for ten consecutive trading days. Management’s
financial commitment acts as a personal guarantee to Macau casino operators for
no-interest, no expiration lines of credit, which is then used to fuel free cash flow
for shareholders, and it also acts as a personal guarantee to common shareholders
against any bad debt AERL may incur in its business.
Forward catalysts include a new VIP room on the Peninsula side of the Island,
which we now expect within 40 - 60 days or so. We believe a new room would
equate to ~4 - ~6 tables and bring an additional no interest/no expiration credit
line. Based on AERL’s 4-month rolling chip average of ~$1.8b amongst its
allocated 29 tables, or $621m per table per month, 4 additional tables (assuming 5%
cannibalization to its existing base), could equate to an additional $1.6b per month
in rolling chip turnover or ~9% overall. Currently, we do not model additional
credit or a new tables/room for AERL. Maintain Buy.


Asia Entertainment & Resources (AERL) Stock Trading Info:
Asia Entertainment & Resources AERL Stock Quote Asia Entertainment & Resources AERL Stock Charts Asia Entertainment & Resources AERL Financial
Public Reply | Private Reply | Keep | Last ReadPost New MsgNext 10 | Previous | Next
Follow Board Follow Board Keyboard Shortcuts Report TOS Violation
X
Current Price
Change
Volume
Detailed Quote - Discussion Board
Intraday Chart
+/- to Watchlist