Churchill Downs a Good Gamble
We reiterate our Buy rating on shares of
Churchill Downs (
CHDN). The company faced a number of irregular issues in 2008, and managed them well, in our opinion.
We remain encouraged by the increasing impact of the company's online advance-deposit wagering business, as well as the growth in Churchill's alternative gaming segment. Additional growth in these areas could provide a catalyst going forward.
Our 12-month price target of $45 per share equates to approximately 10.0x our 2008 EBITDA estimate. We believe that a proper valuation of Churchill's shares should reflect not only the value of the current operations, but also the potential for increased revenue and earnings stemming from additional alternative gaming at the company's properties. Further, the company's low leverage and significant real estate holdings should be taken into account.
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