Boyd Gaming (BYD) REIT Conversion Now Unlikely Scenario - Janney

Janney reaffirms Boyd Gaming (NYSE: BYD) at Neutral with a fair value of $9 following Elliott Associates showing a new 4.99 percent stake in the company.

Analyst Brian McGill commented, Given the recent move higher in the stock, we think shares are now expensive at 9.5x EBITDA. With respect to the core business, we expect trends will remain challenged even as the weather improves. The company has also already removed costs from its business so we do not anticipate margin growth. While the company could look to sell an asset, we think the upside realized from a transaction would be limited given the current valuation.

McGill also doesn't think conversion to a REIT will happen anytime soon, given that Boyd is approaching 2 times leverage. At close to 7x currently, this is unlikely for many years, even if there are asset sales and a huge sale of equity. From a valuation perspective, it's important to remember the company owns 50% of the Borgata and it will report it this way assuming MGM is relicensed in New Jersey, the analyst said.

The Boyd family owning 27 percent of the stock could also make it difficult for an activist investor to demonstrate clout.

For an analyst ratings summary and ratings history on Boyd Gaming click here. For more ratings news on Boyd Gaming click here.

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