Macquarie analyst Chad Beynon believes the company can move past those issues in the Centennial State, and that Monarch’s strong balance sheet sets the operator up for success and could position it to be a buyer of gaming assets in the future.

Monarch’s Black Hawk project has hit some speed bumps over the last several months, as construction delays have been pushing back the grand opening of the renovated property,” said Beynon in a recent research note obtained by Casino.

Early last month, Monarch stock was punished after it was revealed that its contractor, PCL Construction Services, Inc., filed a suit against the casino operator. The legal spat delayed the opening of the the new Monarch Casino Resort Spa Black Hawk from the third quarter to early next year, according to the company.

The project is expected to be a significant profit driver for Monarch because it’s more than doubling the size of the current gaming area while adding a 23-story hotel tower with 500 guestrooms. The project is now being broken into three phases, with Phase 1 slated for completion in early 2020.

“Assuming a double-digit return on the project, we see the property ramping to $40 million-$50 million annual run rate earnings before interest, taxes, depreciation and amortization (EBITDA) by 3Q21,” said Beynon. “Bottom line, while it’s unfortunate that the property completion has been delayed, there are no changes in management’s bullishness on the market and what MCRI can achieve.”

A Big Deal

Timely completion and ramping up of the Black Hawk venue is integral to the thesis for Monarch’s stock, because the company currently owns just one other property – the Atlantis in Reno, Nevada. The Atlantis is viewed as a sturdy property by analysts, and one of the higher-end venues in the “Biggest Little City in the World.”

“In Reno, strong market fundamentals continue, with good job growth, wage growth, and overall demand for MCRI’s Atlantis property, which most consider to be the top property in the market,” said Beynon.

With Monarch already holding a Colorado gaming license, the company would be one of several positioned to benefit if voters there approve a sports betting ballot initiative next week. If that effort passes, the state is expected to allow gaming companies to open retail sportsbooks and offer online and mobile wagering at a later date.

Balance Sheet Could Make Monarch A Buyer

Monarch’s balance sheet compares favorably with other small-cap gaming companies, with leverage of just 2x, which could enable the company to acquire a smaller rival or other gaming assets.

“With the BH (Black Hawk) project nearly complete, we believe MCRI looks for the next project for the company,” said Beynon. “We believe its solid balance sheet will allow it to go out and acquire another property and renovate like its current BH project.”