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Sarah Dashow
LIS 9323 | July 16, 2015
PUBLIC COMPANY REPORT: GREAT CANADIAN GAMING
CORP.
1 Public Company Report: Great Canadian Gaming Corp.
Contents Background .................................................................................................................................. 2
General Information ................................................................................................................ 2
Company History ..................................................................................................................... 2
Industry Information ............................................................................................................... 2
Organizational Components .................................................................................................... 2
Principals .................................................................................................................................. 3
Company Performance ............................................................................................................... 4
Key Indicators .......................................................................................................................... 4
Key Ratios ................................................................................................................................ 4
Industry Comparison (2015) .................................................................................................... 4
Credit Ratings........................................................................................................................... 4
Top Five Competition .............................................................................................................. 4
Analyst Reports ........................................................................................................................ 5
Industry Reports ...................................................................................................................... 5
Market Reports ........................................................................................................................ 6
Company Assets .......................................................................................................................... 6
Top Tangible Assets ................................................................................................................. 6
Intangible Property .................................................................................................................. 6
Company Developments ............................................................................................................. 6
News and Trade ....................................................................................................................... 6
Regulatory Actions ................................................................................................................... 8
Legal Proceedings .................................................................................................................... 8
Awards and Community Involvement ..................................................................................... 9
Appendix A – Key Indicators...................................................................................................... 10
Appendix B – Key Ratios ............................................................................................................ 11
Appendix C – Graph: Canada Casino Gaming Market Revenue 2006-2015 ............................. 12
Appendix D – Graph: Global Casino Gaming Market 2010-2015 .............................................. 13
Appendix E – Graph: Gambling Opinion – Moral Issue ............................................................. 14
2 Public Company Report: Great Canadian Gaming Corp.
Background General Information
Company: Great Canadian Gaming Corp. Date of Establishment: 1982 Jurisdiction: Canada and United States Ticker Symbol: GC Number of Employees: 4500 Gross Sales: $366.3 million Headquarters Location: Richmond, BC, Canada Operation Locations: Canada - Sydney, NS; Halifax, NS; Dundas, ON; Innisfil, ON; Dawson Creek, BC; Nanaimo, BC; Victoria, BC; Vancouver, BC; Richmond, BC; Coquitlam, BC; Surrey, BC; Maple Ridge, BC; Chilliwack, BC United States - Everett, WA; Kent, WA; Tukwila, WA; Lakewood, WA
Company History
The Great Canadian Gaming Corp. started as the Great Canadian Casino Company Ltd.
The company was founded in 1982 and operated charity casinos in a variety of locations in
addition to the Pacific National Exhibition casino and midway games. In the following years,
they opened casinos across British Columbia, including the first permanent casino on
Vancouver Island. In 2004, the company was listed on the Toronto Stock Exchange, and they
expanded into the horse-racing industry. They currently operate 17 gaming facilities. Financial
trends in the recent years suggest that they are growing at a steady rate each year.
Industry Information
Primary Industry Codes
7011 Hotels and Motels (SIC)
721120 Casino Hotels (NAICS)
GC is primarily in the consumer entertainment industry. They are involved “in the operation of
gaming centers, casinos, show theaters, racetracks, and other facilities.” They also operate
under the secondary codes of “Amusement and recreation, nec (7999)” and “Casinos (except
Casino Hotels) (713210).”
Primary Industry Classification
Casinos and Gaming
Hotels, Resorts and Cruise Lines
Organizational Components
The company is composed mainly of subsidiaries in Canada, which includes Casino Nova
Scotia in Halifax, Flamboro Downs Limited in Dundas, Georgian Downs Limited in Innisfil, Great
Canadian Casinos Inc. in Victoria, and Orangeville Raceway Limited and YBC Teletheatre B.C.
Ltd. in Surrey. There is also one subsidiary located in the US, the Great American Gaming Corp.,
3 Public Company Report: Great Canadian Gaming Corp.
which has its own subsidiary, the Evergreen Entertainment Corporation; both of which are
located in the state of Washington.
Principals
Top Five Individuals/Shareholders
LexisNexis
1. Baker (Neil W)
2. Estate of Ross J. McLeod
3. Ridge Capital Amalgamated Corp.
4. RBC Global Asset Management Inc.
5. Norges Bank Investment Management
Thomson One
1. Baker (Neil W)
2. Estate of Ross McLeod
3. O’Shaughnessy Asset Management, LLC
4. Norges Bank Investment Management (NBIM)
5. Dimensional Fund Advisors, L.P.
Officers and Senior Management1
Rod N. Baker – President & Chief Executive Officer
Kiran Rao- Chief Financial Officer
Terrance Doyle -Executive Vice President, BC Operations & Development
Peter Goudron- Executive Vice President, Strategic Resources
Vic Poleschuk - Executive Vice President, Operations – East
Walter Soo - Executive Vice-President, Player & Gaming Development
William D. (“David”) Fretz - President, Great American Gaming Corporation & Vice
President, American Operations
Chuck Keeling - Vice President, Stakeholder Relations & Responsible Gaming
Robert G. Kroeker - Vice President, Corporate Security & Compliance
Jim McGrogan - Vice President, Business Development
Alasdair Douglas - Vice President, Marketing
Board of Directors2
William A. Dimma - Director
Rod N. Baker - Director, President and Chief Executive Officer
Neil W. Baker - Director
Larry W. Campbell - Director
Mark A. Davis -Director
Thomas W. Gaffney - Director
Peter G. Meredith – Chairman
1 http://gcgaming.com 2 http://gcgaming.com
4 Public Company Report: Great Canadian Gaming Corp.
David L. Prupas - Director
Karen Keilty - Director
Company Performance Key Indicators
The key indicators (Appendix A) show an increased growth in revenue and a decrease in capital
expenditures; however, operating costs had a significant increase in 2014 after remaining
steady the previous two years. As the company grows in revenue, it is expected that the assets
and liabilities will grow with it, as seen here. Of note is that correlating with the significant
decrease in capital expenditures and revenue is the loss of 100 employees, which could account
for the money accrued by the company over fiscal year 2014 due to savings in reduction of
salaries to pay.
Key Ratios
The key ratios (Appendix B) suggest general company growth in 2012 and 2013, with a more
significant growth in 2014. They also show that the company was able to move out of the
negative in 2012 to more stable and positive numbers in the following years. This suggests
longevity as it provides proof that GC management is able to respond and react to negative
impacts effectively.
Industry Comparison (2015)
According to financial data from 2015, GC falls mostly in the high-middle of the competition.
Considering revenue as of July 2015, their 348.9 falls pretty solidly above the median of 203.8.
If considering closing prices, GC again falls near the median of 16.93 with 17.67 as their last
closing price. When factoring in total enterprise value, they are well above the median of 373.7
with their latest value of 1,312.9. The high in this category is 5,141.1 and the low is 21.7, which
places GC well ahead of the lesser competition in enterprise value. Overall, the company stands
firmly in the middle and has remained as such for the last 3 fiscal years implying consistency in
the industry.
Credit Ratings
As of June 2015, the company’s long term rating is type LT Corporate Family Ratings and
was Ba3, not on watch. The short term rating is type Speculative Grade Liquidity Rating and was
SGL-1, not on watch. The outlook for GC is stable (Moody’s).
According to Capital IQ’s credit health panel, the company’s relative credit score is top
in solvency; however, they fall below average in some categories such as total revenue, total
equity, return on capital, and asset turnover, among others. They are in the red on total debt to
capital ratio and total debt to revenue ratio.
Top Five Competition
1. MGM Resorts International (Las Vegas, NV, USA)
2. Wynn Macau Ltd. (Macau)
3. Penn National Gaming Inc. (Wyomissing, PA)
5 Public Company Report: Great Canadian Gaming Corp.
4. Boyd Gaming Corporation (Las Vegas, NV)
5. Pinnacle Entertainment Inc. (Las Vegas, NV)
The company’s main competition are other casino and resort companies. Of note is that 3 of
the 5 competitors are located in Las Vegas. This would make sense as Las Vegas is an area with
a strong reputation in the casino industry and a very popular tourist destination that would
drive revenue. This list was produced using LTM Revenue and only consists of disclosures from
within the last two years.
Analyst Reports
The McGraw Hill Companies, Inc. “Great Canadian Gaming Corporation to Commence
Solicitation of Consents to Amend the Trust Indenture.” April 27, 2015. Available from
LexisNexis, accessed July 16, 2015.
The Great Canadian Gaming Corp. wanted to obtain approval via consent for a certain
amendment to an Indenture that would allow them to make payments that would have been
restricted otherwise. This would allow the company greater freedom in the remaining 7-years
of this term to repurchase common shares, pay cash dividends, and make shareholder
distributions.
Ubiquick SAS. “Analyzing the Casinos and Gambling Industry in Canada.” March 1, 2013.
Available from LexisNexis, accessed July 16, 2015.
This report looks at the casino and gaming industry in Canada. While it does not focus
on GC exclusively, it covers the steady and moderate growth of the casino industry within
Canada through industry outlook, value analysis, demand, trade, and a multitude of other
factors. It discusses GC as one of the established players in the industry.
Credit Suisse. “First Edition Canadian Alert: Highlights from Canada.” May 13, 2015. Available
from Thomson One, accessed July 16, 2015.
This report looks at three companies for estimate/target prices changes and one for
company updates. It covers Great Canadian Gaming Corp. under estimate/target price changes.
The analyst highlighted the agreement to buy Casino New Brunswick which is favorable
compared to the current 2015 estimates and mostly in-line with US peers. This transaction
should close by fall 2015. Finally, the analyst expresses that GC remains active in modernizing
gaming in Ontario, and gives them a neutral rating based on share price, a fair reflection of their
growth prospects.
Industry Reports
IBISWorld Industry Report 71320CA – Gambling in Canada3
Market Line Advantage – Canada-Casinos & Gaming4
Industry Canada – Report for: NAICS 7132 – Casinos (except casino hotels)5
3 http://clients1.ibisworld.com.proxy1.lib.uwo.ca/reports/ca/industry/default.aspx?entid=1662 4 http://advantage.marketline.com.proxy1.lib.uwo.ca/Product?pid=MLIP1470-0004 5 https://www.ic.gc.ca/app/sme-pme/bnchmrkngtl/rprt-flw.pub?execution=e2s3
6 Public Company Report: Great Canadian Gaming Corp.
Market Reports
The graphic in Appendix A depicts the casino market from 2006 until 2010, and the
projected market size from 2011 to 2015 in Canada. It implies that revenue will continue to
grow, which aligns with the growth in GC’s revenue over the past few years.
The graphic in Appendix B shows a breakdown of casino and gambling revenue by
geographical region. Despite GC’s large presence in Canada, it highlights that most of the
gaming industry comes from the US, which could have an effect on GC’s US subsidiary.
The graphic in Appendix C reflects the consumer options of whether gambling is a
normal issue. Other countries have been removed from the chart in order to conserve space, in
addition to limiting the focus to two of GC’s jurisdictions plus Britain for comparison. This graph
implies that the success of GC and the company growth could be the direct result of consumer
opinion being over 50% indifferent to gambling as a moral issue.
Company Assets
Top Tangible Assets
Great Canadian Gaming Corp. owns 17 casino and gaming facilities and the land they
operate on. Also of note from recent annual reports is all plants and equipment located on
these properties. Some of these are Hard Rock Casino Resort, Fraser Downs Racetrack and
Casino, Casino Nova Scotia Sydney, and Great American Casinos.
Intangible Property
Great Canadian Gaming Corp. holds some trademarks on the names of their casino
businesses; however, the annual report does not outline the details only a renewal of some
assets in Nova Scotia.
Company Developments News and Trade
Korstrom, Glen. “$100,000-per-hand table games fuel $1.25 billion BCLC profit.” Business
Vancouver. July 16, 2015. Available from Mergent Online, accessed July 17, 2015.6
This news piece covers the British Columbia Lottery Corp choice to increase table limits.
This is important to GC, because this report says that they have had these higher limits in their
VIP rooms for the past year, so this is an example of how these casinos compete for revenue,
and it has worked positively for both companies. However, the availability of these higher limit
tables at other casinos could negatively impact consumer use of GC’s facilities.
Stuek, Wendy. “At the track; own two racehorses for a year for $250.” The Globe and Mail. July
7, 2015. Available from LexisNexis, accessed July 17, 2015.7
This article discusses the opportunity to invest in a horse at the Hastings Race Club. As
GC owns this race club, it is important in that an article such as this which discusses a consumer
buy-in available at one of their facilities could bring consumers in that would have not
previously been reached. Any positive publicity such as this is beneficial to the company.
6 https://www.biv.com/article/2015/7/100000-hand-table-games-fuel-125-billion-bclc-prof/ 7 http://www.lexisnexis.com.proxy1.lib.uwo.ca/hottopics/lnacademic/?verb=sf&sfi=AC02NBCmpDosSrch
7 Public Company Report: Great Canadian Gaming Corp.
Reagan. “Insider Selling: Desmond Balakrishnan Sells 3,400,000 Shares of Great Canadian
Gaming Stock.” The Legacy. July 1, 2012. Available from Mergent Online, accessed July 17,
2015.8
This news piece provides some insight into insider trading that ties into recent analysis
of GC shares from a number of companies. TD reported a raise in target price on shares and
gave GC a “buy” rating along with four other analysts. Scotiabank predicts that GC will
“outperform” previous years. This is important because a positive analysis such as this could
lead to an increase in stock sales for GC.
“Casino News Brunswick sold to Great Canadian Gaming.” Casino City Times. June 5, 2012.
Available from Mergent Online, accessed July 17, 2015.9
This is a brief news piece that states simply that GC has purchased a new casino for $95
million. This is relevant because it presents an increase in holdings and suggests a positive
outlook as there is room for expansion.
“Great CDN to buy 3.4 million shares from McLeod Estate.” Alpha Stox. May 25, 2015. Available
from Mergent Online, accessed July 17, 2015.10
This articles covers the purchase of shares from deceased ex-director and officer of GC,
Ross J. McLeod. This was done in order to cancel the shares. The company released a statement
saying that this would be a great opportunity to increase shareholder value and ensured
shareholders that they have the cash reserves and credit required to not only make this
purchase but move forward with other plans, such as the purchase of the aforementioned New
Brunswick Casino.
Smith, Nelson. “Should you gamble on Amaya Inc. or Great Canadian Gaming Corporation?” The
Motley Fool. March 18, 2015. Accessed July 17, 2015.11
This is an article analyzing the potential of GC and one of its competitors, Amaya Inc. It is
relevant because it provides a direct point of comparison for investors and could influence
whether shareholders choose GC as an investment. Smith provides some positive feedback
about GC stating that their positive government relationship makes them an ideal company for
expanding or buying out competitors, but in order to continue to grow, they should build or
acquire new properties.
Erskine, Bruce. “Great Canadian Gaming hits jackpot, but Halifax, Sydney casino cash dips.”
Herald Business. August 15, 2015. Accessed July 17, 2015.12
This article highlights a massive success for GC in a 75% growth report in 2014 compared
to the same quarter in 2013. This performance was related to River Rock and Hard Rock Casino
Vancouver, and they announce that they will be using the funds to continue to invest in Nova
8 http://www.lulegacy.com/2015/07/01/insider-selling-desmond-balakrishnan-sells-3400000-shares-of-great-canadian-gaming-stock-gc/529363/ 9 http://www.casinocitytimes.com/news/article/casino-new-brunswick-sold-to-great-canadian-gaming-213186 10 http://my.alphastox.com/great-cdn-to-buy-3-4-million-shares-from-mcleod-estate/ 11 http://www.fool.ca/2015/03/18/should-you-gamble-on-amaya-inc-or-great-canadian-gaming-corporation/ 12 http://thechronicleherald.ca/business/1229675-great-canadian-gaming-hits-jackpot-but-halifax-sydney-casino-cash-dips
8 Public Company Report: Great Canadian Gaming Corp.
Scotia despite less market value in that location. This is important because it shows how
management chooses to invest surplus and could be used to predict future decisions.
Ula, Frances. “Vision’s campaign ready for war; Vancouver’s ruling party has already raised
$2.2-million this year, as parties reveal their finances ahead of the vote.” The Globe and Mail.
November 7, 2014. Available through LexisNexis, accessed July 17, 2015.13
While this articles mainly focuses on how Vancouver’s ruling civic party is raising money.
Of note is that of these donations, GC provided $10,000. This shows an interest in being
involved with local politics and the community.
Wingrove, Josh. “Wallin, Gerstein and others have earned millions of dollars outside of
Senate…” The Globe and Mail. November 9, 2013. Available through LexisNexis, accessed July
17, 2015.14
This article is about politicians who make money outside of their main job. Of note is a
mention of Larry Campbell who is a current board member at GC. This is relevant because it
provides some insight into the people that serve on GC’s board and who are influential in
making decisions.
Avery, Simon. “Great Canadian Gaming: Winning hand or roll of the dice?” The Globe and Mail.
May 2, 2011. Accessed July 17, 2015.15
This article was written when GC was underperforming in 2011, and they were making
moves to increase revenue and strengthen their stock. It highlights the acquisition of Chilliwack
Bingo Association where GC planned to build a community gaming centre that should add $4-
million to annual revenue, but the article also discusses challenges that GC could face, such as
rising gas prices and wage inflation which could affect this potential positive in revenue
generation. Articles like this are important for determining potential and outlook of a company
and providing insight into their decision making.
Regulatory Actions
The only recent regulatory actions for GC involve the news article related to buying the McLeod
estate shares. This required regulatory approvals in order to proceed as the purchase would be
exempt according to Multilateral Instrument 62-104 Take-Over Bids and Issuers Bids.16
Legal Proceedings
“Lawsuit of the week: Former table games boss sues Great Canadian Gaming for wrongful
termination.” Business Vancouver. July 7, 2015.17
This case has no yet reached the courts, and GC has not yet filed a report. Robert
McIntyre is the former director of table game operations and is suing for wrongful termination
(without proper notice) after 30 years with GC. He is suing for damages for a breach of contract.
13 http://www.lexisnexis.com.proxy1.lib.uwo.ca/hottopics/lnacademic/?verb=sf&sfi=AC02NBCmpDosSrch 14 http://www.lexisnexis.com.proxy1.lib.uwo.ca/hottopics/lnacademic/?verb=sf&sfi=AC02NBCmpDosSrch 15 http://www.theglobeandmail.com/globe-investor/investment-ideas/great-canadian-gaming-winning-hand-or-roll-of-the-dice/article598383/ 16 https://ca.finance.yahoo.com/news/great-canadian-gaming-buy-back-110000760.html 17 https://www.biv.com/article/2015/7/lawsuit-week-former-table-games-boss-sues-great-ca/
9 Public Company Report: Great Canadian Gaming Corp.
This case can have a major effect on GC’s reputation if they are discovered to be involved with
questionable hiring practices in order to save money from paying out performance incentives
and cash awards to long-time employees.
Proctor, Jason. “BC Lottery Corporation sued for allegedly taking casino cash.” CBC. March 29,
2015.18
This case is still under review; GC has refused to comment and none of the claims have
been proven in court. This lawsuit responds to a marketing trust account agreement between
BCLC and casino companies with over 300 slot machines; it outlines that companies were
required to contribute money to fund campaigns that promoted casinos in a socially
responsible way. This contract was terminated by BCLC in 2009, but GC is claiming that BCLC
has taken $18-million since. This is important because this could either provide bad press for GC
making a claim for something that is not happening, or if it is true, then this is money that is
being taken from their revenue without an agreement to back it which could negatively impact
the company’s growth.
Awards and Community Involvement
2011 – Volunteerism and Community Service Award (Canadian Gaming Industry)19
GC funded 1607 community groups throughout 2013/2014. There is direct community support
through GC’s PROUD program, which supports charitable and community organization through
financial and volunteer opportunities.
GC donated $36.5-million to local municipalities in 2013/2014.
18 http://www.cbc.ca/news/canada/british-columbia/b-c-lottery-corporation-sued-for-allegedly-taking-casino-cash-1.3013077 19 http://www.canadiangamingbusiness.com/CanadianGamingIndustryAwardWinners.aspx
10 Public Company Report: Great Canadian Gaming Corp.
Appendix A – Key Indicators
FY2014
Total Revenue $446,500
Operating Income $133,000
Capital Expenditures ($14,800)
Total Assets $1,014,100
Total Liabilities $613,800
Employees 4500
FY2013
Total Revenue $407,300
Operating Income $92,400
Capital Expenditures ($24,800)
Total Assets $915,700
Total Liabilities $608,200
Employees 4600
FY2012
Total Revenue $408,700
Operating Income $92,400
Capital Expenditures ($25,400)
Total Assets $862,700
Total Liabilities $582,400
Employees 4600
11 Public Company Report: Great Canadian Gaming Corp.
Appendix B – Key Ratios
FY2014
Profitability
Gross Margin 63.1%
Operating Margin 17.6%
Net Profit Margin 17.6%
Financial Strength
Current Ratio 4.8x
Debt/Equity Ratio 110.4%
Management Effectiveness
Return on Assets 8.4%
Return on Equity 22.2%
FY2013
Profitability
Gross Margin 60.6%
Operating Margin 15.5%
Net Profit Margin 15.5%
Financial Strength
Current Ratio 3.0x
Debt/Equity Ratio 143.4%
Management Effectiveness
Return on Assets 6.5%
Return on Equity 21.5%
FY2012
Profitability
Gross Margin 60.4%
Operating Margin (6.8%)
Net Profit Margin (6.8%)
Financial Strength
Current Ratio 2.1x
Debt/Equity Ratio 156.9%
Management Effectiveness
Return on Assets 6.4%
Return on Equity (7.9%)
12 Public Company Report: Great Canadian Gaming Corp.
Appendix C – Graph: Canada Casino Gaming Market Revenue 2006-2015
13 Public Company Report: Great Canadian Gaming Corp.
Appendix D – Graph: Global Casino Gaming Market 2010-2015
14 Public Company Report: Great Canadian Gaming Corp.
Appendix E – Graph: Gambling Opinion – Moral Issue