Entries by Ken Liu

Questions about the Palms Acquisition

Red Rock Resorts announced its acquisition of the Palms on May 10. We believe investors and analysts should ask the following questions: When will Red Rock disclose the Palms purchase agreement? What will Red Rock have to do to bump Palms’ EBITDA up by 25% in one year? Will “Palms Station” cannibalize Palace Station?

How Will Red Rock Grow in a Saturated and Stagnant Market?

The flip side of Station Casinos’ saturation of the locals market means growth in its core Las Vegas business would have to come from significant increases in (1) the population of Las Vegas and/or (2) customer spending per capita. Facing low population growth and a decline in locals’ gaming behaviors, the company is unlikely to experience much, if any, upside in its core Las Vegas locals business.

Fidelity Would Have Valued Station Casinos at $9.19 at the End of January

If Fidelity bond funds valued at Station Casinos at an estimated $9.19 per share at the end of January, what will Fidelity equity funds value the company at if they decide to participate in the upcoming Red Rock Resorts IPO? Will Fidelity ask itself, internally, how Station Casinos could have doubled in value in less than three months?

More Growth Questions about the Las Vegas Locals Gaming Market

Economic data from federal agencies and gaming data from the Gaming Control Board suggest the current recovery in the Las Vegas area is moving slower than a previous post-recession recovery. Furthermore, we identify a potential limit to the current recovery in terms of the slot win percentage. Growing casino revenue through tighter slots has its limits.

Deutsche Bank Would Have Valued Red Rock at $5.39 Per Share a Year Ago

According to a 2/17/15 Deutsche Bank analyst report, Station Casinos LLC, as of 12/31/2014, was estimated to have an enterprise value to be $2.59 billion with an implied an equity valuation of $624.6 million. Investors should ask Deutsche Bank how, in its opinion, the value of Station Casinos could have more than tripled in little over a year.

Dividends on Your Second-Class Red Rock Shares? Don’t Count on It

With questionable prospects for growth and poor corporate governance, investors in the Red Rock IPO might want to look to dividends for a reason to invest in Red Rock. But, as a result of its other obligations, there is no certainty the company will be able to pay dividends at a level that satisfies public shareholders.

Red Rock Resorts is a Second-Class Gaming IPO

Investors who buy Red Rock’s second-class shares on offer will gain a minority (33%) stake in the once-bankrupt Las Vegas casino and tavern operator, Station Casinos. The terms of the offering beg questions about company insiders’ confidence in its long-term prospects. Prospective investors should ask management the following questions

Questions about the Audited Financial Statements of Red Rock Resorts

Did Fertitta Entertainment provide audited financial statements with an unqualified opinion by its auditor after it agreed to be acquired by Red Rock? If it did not provide audited financial statements, how did Red Rock’s auditor handle the inclusion of Fertitta Entertainment when it produced the audited consolidated financial statements of the Station Holdco holding company?

Why is Station Casinos Selling Valuable Casino Sites?

Investors should ask Red Rock Resorts/Station Casinos and its IPO underwriters: Why is the company selling valuable casino sites? Where will growth come from if the company is selling off future casino sites? Do the Fertittas and other executives of Red Rock have confidence in the company’s core Las Vegas locals business?