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

Prospective investors in Red Rock Resorts should ask Deutsche Bank how, in its opinion, the value of Station Casinos could have more than tripled in little over a year.

According to a 2/17/15 analyst report by Deutsche Bank gaming high-yield analyst Andrew Zarnett, Station Casinos LLC, as of 12/31/2014, was estimated to have an enterprise value to be $2.59 billion, which would have implied an equity valuation of $624.6 million after subtracting net debt of $1.97 billion. That equity valuation would have translated to about $5.39 per share with the fully-diluted number of shares outstanding of 115.9 million found in Red Rock’s 4/15/16 S-1/A filing

Red Rock’s 4/15/16 S-1/A filing shows an IPO price range of $18.0 to $21.0 per share. Using the mid-point of $19.5 per share and the fully diluted shares outstanding figure of 115.85 million, the company and its underwriters, one of whom is Deutsche Bank, are offering an equity valuation of $2.26 billion and, adding net debt of $2.04 billion, an enterprise value of $4.30 billion for Station Casinos LLC.

Station Casinos Valuation Jump

	12/31/14	4/15/16
Enterprise value	$2,590 million	$4,298 million
Net debt	$1,965 million	$2,039 million
Equity	$625 million	$2,259 million
Implied per share price on 115.85 million shares outstanding	$5.29	$19.5

From 12/31/14 to 4/15/16, the share prices of four publicly-traded regional gaming operators (BYD, PENN, PNK, ISLE) rose by an average of 61%.

Investors should ask Deutsche Bank how, in its opinion, the value of Station Casinos could have more than tripled in little over a year.

(See also our earlier piece on the estimated valuation Station Casinos equity as implied by SEC filings by Fidelity, a current minority owner.)

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• Download our unauthorized roadshow presentation, “Red Rock Resorts: A Second-Class IPO” here.
• The insiders are cashing out at a high price compared to the company’s estimated equity.
• Growth concerns in the company’s primary Las Vegas locals market and the lack of new development agreements in the tribal gaming market.
• The tax receivable agreement could drain substantial amount of cash out of the company and affect free cash flow.
• The dual-class structure will make public investors second-class shareholders.
• The lack of disclosure regarding the regulatory problems of Deutsche Bank, a 25% current owner.