Value Investing

Land and Buildings: Boyd Should Do A REIT IPO

Land and Buildings founder Jon Lit comments on its Boyd Gaming (NYSE: BYD) stake. It owns 0.6% and thinks the company should follow in MGM’s footsteps with a REIT IPO. Here is Lits’ comments:

“The successful IPO of MGM Growth Properties (NYSE: MGP) last week and strong valuation of both MGP and Gaming and Leisure Properties (NASDAQ: GLPI), at 14x and 13x 2017 EBITDA, respectively, paves the way for a Boyd REIT. Boyd closed Friday, April 22, 2016 at $20.03 per share, or an 8x 2017 EBITDA multiple, suggesting 60% upside in the shares should they pursue a REIT IPO similar to MGP at valuations consistent with gaming operator Penn National Gaming (NASDAQ: PENN) and REITs GLPI and MGP.

On the Company’s last earnings call in February management addressed the formation of a REIT, stating, “We’re continuing to think through the issue and monitor developments in our space.” We look forward to management providing an update on its REIT evaluation on tomorrow’s earnings call.

Boyd’s underlying fundamentals are robust and we expect will prove better than anticipated in 2016. The Company reported double-digit EBITDA growth in the fourth quarter, driven by a combination of revenue growth and margin expansion. In addition, nearly half of the Company’s EBITDA is generated by its Las Vegas locals, Las Vegas downtown and premier Atlantic City assets – all markets enjoying fundamental tailwinds. Against this backdrop, we believe the time is right for a Boyd REIT.”

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