Iao Kun price target, RCT estimates lifted after positive Q1

    Sterne Agee has lifted its share price target on Nasdaq-listed junket operator Iao Kun Holdings and reiterated its Buy rating following “solid” first-quarter results.
    The firm said its price target goes to $5.90 from $5.50 based on 10x 2015 earnings per share and 8x free cash flow per share. That represents about 78 percent upside from the current market price.
    The estimate for rolling chip turnover was raised to $19.1 billion for 2014 and $19.8 billion for 2015 from $17.9 billion and $18.6 billion respectively. Forecasts for EPS were adjusted to $0.39 for 2014 from $0.46 previously. While the estimate for 2015 was upped to $0.59 from $0.51. The 2014 EPS estimate was affected by an abnormally low win rate in April, Sterne Agee said.
    Rolling chip turnover growth “has exceeded Macau market results and should increase investor attention to the benefit of the shares,” the note said. Iao Kun’s Q1 rolling chip turnover was up 17 percent compared with 16 percent for the Macau market. It maintained that growth rate in the month of April, when the market as a whole was flat.
    Iao Kun has been on a marketing campaign since October last year to acquire cash agents and told analysts on a conference call that this process “has only just begun.”
    Iao Kun is seeking a dual-listing on the Hong Kong Stock Exchange later this year.
    “We continue to believe the HK listing will unlock value for U.S. shareholders by – potentially significantly – broadening its investor base.”