Morgan Joseph Reiterates a 'Buy' on Full House Resorts (FLL); Increases Estimates

November 11, 2009 8:48 AM EST

Morgan Joseph reiterates a 'Buy' on Full House Resorts (NYSE: FLL), price target $5.25.

"Management stated that play levels have been stable for the past five to six weeks following the stronger-than-expected opening in August. Marketing expense, which began to ramp in mid-September, has been within the company's target (undisclosed). As a result, EBITDAM margins should come down from the mid-60% area (helped by a soft opening) but will likely remain above 50%. We expect Full House's share of the GEM management fee to be $3.0mm in 4Q09, and to average $2.5mm per quarter in FY10...We have increased our FY09 revenue estimate to $20.8mm from $9.3mm to reflect the addition of FK management fees. Previously, we showed it as equity in net income. Our FY09 EPS estimate increases to $0.26 from $0.22, reflecting the Q3 outperformance. Our 4Q09 EPS estimate remains $0.11. We believe our table games revenue estimate was too high but should be offset by higher EBITDAM margins, hence the unchanged EPS estimate...We have increased our FY10 revenue estimate to $29.6mm from $9.4mm, reflecting the addition of the FK management fees to the revenue line. Our EPS estimate remains $0.41."

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