Investment Thesis
an ag em en t
Situation String of casino closures in Atlantic City has caused a knee-jerk reaction in Tropicana’s stock price, which has dropped from $18.85 on 7/14 to $15.00 on 1/22 (~20% decline)
tM
Unwarranted Reaction This price reaction is unwarranted – although Tropicana’s AC property accounts for ~32% of the company’s revenue, it only accounts for ~14% of its EBITDA Closure of competitors actually creates a potential opportunity to capture additional market share
As
se
Additional Reasons for Undervaluation Out-of-favor, mature industry - especially gaming in non-Vegas markets Thinly traded micro-cap stock (~ 8,445/day), potential of being priced inefficiently No analyst coverage
Br
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Opportunity Strong cash balance and recent behavior point to future appetite for acquisitions Tropicana is extremely undervalued from multiple valuation methodologies Financial statements don’t tell complete story when considering NOLs and replacement value Icahn Enterprises (largest shareholder) has strong track record for turning around casinos Improving macroeconomic conditions will drive up consumer discretionary spending 7