Parag Vora is mostly known to us from his presentation at last year’s Robin Hood Conference. Vora presented his thesis on Pinnacle Entertainment, Inc (NYSE:PNK), a company that operates casinos. Vora recently put money in another leisure company, Town Sports International Holdings, Inc. (NASDAQ:CLUB), where his fund bought a 16% stake. Town Sports operates over 160 fitness clubs through its four brand names. Vora has asked the company to look into share buybacks and/or dividends as well as explore options for sale.
Vora Capital on Pinnacle Entertainment
According to HG Vora Capital’s quarterly letter reviewed by ValueWalk, the fund managed only a 0.4% return in the second quarter. Vora Capital is now up 4.9% for the year. The fund was supported ij its Pinnacle Entertainment investment by Orange Capital. In April, Orange Capital filed a 13D proposing that the casino operator spin off its real estate holdings into a REIT. Orange holds 4.4% of Pinnacle’s outstanding shares.
In the quarterly letter, Vora expanded on this proposal and said that if Pinnacle spins off a REIT, it will make for a more defined corporate structure, easier deleveraging and an increase in enterprise value. Vora also said that there are precedents which indicate that Pinnacle Entertainment will get IRS approval if it takes this course of action.
Vora Capital’s P&L in 2Q2014
At the end of the June quarter, the fund held 45% of its assets in debt-related investments; 37% was held in equity whereas the remaining 21% was held in cash. The letter noted that the equity portfolio comprised of 10 value and event-driven investments. Vora said that due to more short exposure in the second quarter, the portfolio ran a less than average net exposure in 2Q2014.
The fund holds senior secured bank debt of Caesars Entertainment Corp (NASDAQ:CZR), SuperMedia Inc (NASDAQ:SPMD) and Technicolor SA (EPA:TCH) (OTCMKTS:TCLRY), which were profitable over the last quarter. Vora Capital grossed a +0.9% return in its long credit portfolio in Q2, whereas the gross return on long equity portfolio was up 6.5%.
The fund also made profits in Expedia Inc (NASDAQ:EXPE), Ashford Hospitality Trust, Inc.(NYSE:AHT), International Game Technology (NYSE:IGT) and Chatham Lodging Trust (NYSE:CLDT) in the past quarter. By the end of June, Vora had exited its position in Expedia, Chatham Lodging and International Game.
The fund increased holding in American Realty Capital Properties Inc (NASDAQ:ARCP). This one is also under the watchful eye of an up and coming activist, Mick McGuire’s Marcato Capital Management. According to a 13d filing, McGuire has owns 21.8 million shares of ARCP. At the beginning of June, McGuire urged ARCP to put an end to its acquisition spree and scolded the company for its disregard of shareholder value when it issued equity below fair value.
Amaya Gaming, Vora’s foray into online gaming
Vora Capital initiated a new position in Amaya Gaming Group Inc. (TSE:AYA). Amaya counts Rational Group among its new acquisitions. According to Vora Capital’s letter, this is where Amaya Gaming’s true value lies. Rational Group controls 65% share in worldwide poker market, after it acquired its insolvent competitor Full Tilt. Vora said that Rational Group is set to generate $500 million in FCF this year which puts Amaya at the forefront of the developing gaming industry.
HG Vora Capital welcomed Ted Detmer as a new trader in the fund, Detmer has previously worked at Jefferies.