Betting On Canterbury Park Holding
Canterbury Park Holding Company (CPHC) is a small-cap stock, that conducts pari-mutuel wagering operations and hosts unbanked card games at its racetrack and card casino facility in Shakopee, Minnesota. It is a member of the Russell Microcap Index, and its fortunes are on the rise.
Canterbury Park is prospering in a similar fashion as Lewis and Clark and the Corps of Discovery did from the skills of Sacagawea. Lewis and Clark needed horses from the Shoshone tribe, to cross over the Rocky Mountains, and Sacagawea provided a friendly link to the tribe that would deliver horses to the Corps of Discovery. These horses allowed Lewis and Clark to reach their destination of the Pacific Ocean.
In June of 2012, the Shakopee Sioux Indian Tribe of Minnesota, galloped forward to partner with Canterbury Park in a ten year $75 million Cooperative Marketing Agreement, that provides Canterbury Park with $5.3 million in purse enhancement funds for the 2013 Summer horse racing season. The Shakopee Mdewakanton Sioux is a federally recognized Indian tribe, who owns the Mystic Lake casino not far from Canterbury Park. The purse enhancements are the gift that keeps on giving, as it pays $5.8 million to Canterbury Horse racing purses in 2014, $6.4 million in 2015, $7.1 million in 2016, and continues at $8 million per year in 2018 thru 2022. These purse boosters should propel CPHC, as they promote enhanced Canterbury Park horse racing to fans and bettors alike.
A horse racing purse is the total amount of money paid to the owners of the winning horses-typically for horses finishing 1st, 2nd and 3rd. As a purse rises, higher caliber horses are entered into the richer races, and horse bettors prefer to bet on these races.
Canterbury Park Holding had to agree to one major condition-not to actively pursue or lobby the Minnesota legislature for a “Racino”, which would include slot machines at Canterbury. The Shakopee Sioux tribe owns the Mystic Lake Casino which is only 5 miles from Canterbury Park. The Sioux tribe was not anxious to compete with Canterbury for fans who enjoy playing the slot machines.
These rising purses have led to significant increases in the 2013 track handle. The handle is the amount of money “bet” by horse racing spectators and fans. As the handle grows, more bettors are attracted to wager on Canterbury races, as their potential winning bet payouts rise. The larger purse payouts attract a higher quantity of horses who enter races trying to win a pay day. As more wagers come in to Canterbury, the track management automatically adds more money to the Minnesota Breeders Fund, which bolsters purses for Minnesota bred horses, who will likely be racing at Canterbury shortly.
Since Canterbury does not “touch” the $75 million in total purse enhancements, it does not record the payments as “expenses”.
Live handles have grown approximately 24% in 2013, and out of state bettors have been leading the charge to bet on this higher caliber horse racing, with the larger purse money. Simulcast betting allows for Canterbury Park to receive betting from pari-mutuel locations across the country, and bettors are increasingly wagering on Canterbury races.
Through July 28st, I have recorded Canterbury Park live handle at $22 million (using horse racing public figures) and on pace to break the company record of $36 million in 2006. Live handle includes betting from on track Canterbury fans, and from simulcast wagering on Canterbury races- from out of state bettors. If the handle continues to track at current levels, it should approach $40 million by the end of their racing season. July weather has been terrific and Canterbury racing fans have been turning out in large numbers.
As Canterbury Park has been given the okay to double their poker game limits from $50 to $100, and increase the number of card tables from 50 to 80, I project that Card Club growth could approach 11% in 2013. The company receives a fee on each bet and the card players bet against each other, not the company. This means there is no risk for the company to “lose” on a game.
Canterbury Park President Randy Sampson is a terrific CEO who has managed to retain $10.3 million in cash, and $0 in long-term debt. The Cooperative Marketing Agreement with the Shakopee Sioux, includes a Stock Appreciation Rights agreement that assigns 165,000 rights over 10 years to the Shakopee Sioux tribe. The rights allow for a cash payment for vested appreciation of the stock price over $14.30 per share.
Canterbury Park has a capitalization value of $40 million based on the $10 stock price. With only 4.15 million shares outstanding, this stock is lightly traded at this time. If you decide to make a bet, you will have to be patient as there are not many sellers. The company has authorization to repurchase 100,000 shares of stock and paid dividends totaling $.50 per share in 2012. Canterbury management has plenty of cash to buy back shares and reward stockholders.
Earnings per share could jump to the $.80 per share vicinity for 2013, as compared to $.25 last year. Canterbury stock price was recently $10 per share and will likely rise over the next seven months, if earnings growth follows the purse and handle growth that I have seen in 2013.
Disclosure: I am long CPHC. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article. (More…)