Echo Entertainment Group is one of the cheapest casino operators in the world, according to Credit Suisse analysts.
Credit Suisse said Echo trades at 5.8-times consensus forecast 2015 financial year earnings, on an enterprise value-to-earnings before interest, tax, depreciation and amortisation basis, and 12-times 2015 forecast profit.
“EGP is registered as one of the least expensive casinos in our global comparative company list,” the analysts told clients in a note titled “Cheap for a reason, but cheap nevertheless”.
The analysts upgraded Echo from “neutral” to “outperform” in the wake of its first-half financial results on Wednesday, despite slashing its 12-month target price to $2.50 from $3. Deutsche Bank analysts also upgraded the stock to “buy”.
Credit Suisse said investors may re-rate Echo shares once they had confidence in its earnings base, and there was some indication revenue should stabilise in the second half of the 2014 financial year and grow during 2015.
The analysts said they were pleased with the elevation of Echo chief financial officer Matt Bekier to chief executive, saying it could bring a “more conservative view” about capital expenditure in Brisbane.
UBS also stuck with its “buy” rating and $3.70 a share price target. The broker said chief executive John Redmond’s resignation was a surprise.
EGP Price at posting:
$2.35 Sentiment: Buy Disclosure: Held
