Accel Entertainment Says It Will Repurchase up to $200M of Stock

Posted on: November 22, 2021, 11:43h. 

Last updated on: November 22, 2021, 12:36h.

Todd Shriber @etfgodfather Read More
Expertise: Financial, Gaming Business, Mergers and Acquisitions.

Accel Entertainment (NYSE:ACEL), one of the largest distributed gaming operators in the US, said today it will buyback up to $200 million worth of its own shares.

Accel buyback
Gaming distributor Accel Entertainment said it’s buying back up to $200 million in stock. The shares rallied on the news. (Image: The Motley Fool)

News of the repurchase program is lifting Accel stock, sending it higher by nearly 3.3 percent in midday trading on volume that’s already exceeded the daily average. Quietly, the Illinois-based company is one of the best-performing gaming equities this year, as highlighted by a 21.39 percent year-to-date gain.

This announcement underscores the confidence we continue to have in the strength of our balance sheet as well as the quality of our strategic assets. We are excited to pursue a potential return of capital to stockholders,” said Accel CEO Andy Rubenstein in a statement.

Accel is a provider of video gaming terminals (VGTs) in Illinois. Accel’s VGTs are found in businesses such as restaurants, bars, taverns, convenience stores, liquor stores, truck stops, and grocery stores.

Buyback Could Represent Big Chunk of Accel Stock

Companies are under no obligation to purchase the entire amount announced in a share buyback plan. Regarding Accel’s repurchase scheme, the “timing and actual number of shares repurchased will depend on a variety of factors, including price, general business and market conditions, and alternative investment opportunities,” according to the company.

However, if the firm does purchase $200 million of its equity, that’s a significant chunk of its current market capitalization of $1.18 billion. Based on that number and Accel’s stock price entering Monday, a $200 million buyback is equivalent to 17 percent of the company’s shares outstanding.

“The repurchase program does not obligate the Company to acquire any particular amount of shares, and the repurchase program may be suspended or discontinued at any time at the Company’s discretion,” said Accel in the release.

Still, it’s an encouraging sign. Accel joins International Game Technology (NYSE:IGT) and Melco Resorts & Entertainment (NASDAQ:MCLO) in recently announcing buyback plans. Additionally, Red Rock Resorts (NASDAQ:RRR) earlier this month said it’s paying a $3 per share special dividend, and that it’s buying up $350 million worth of its own shares in a Dutch auction.

Analysts Like Accel

Accel’s buyback announcement adds to growing signs gaming companies are warming to renewing shareholder rewards, and some analysts like the VGT distributor’s story.

In a note out earlier this month, Deutsche Bank analyst Steven Pizzella boosted his rating on Accel to “buy” from “hold” with a $17 price target. The shares currently reside just under $13.

“We believe ACEL represents an underappreciated growth story within our gaming coverage universe (~17% two-year adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) compound annual growth rate), with ample capacity to flex the balance sheet (2023E net debt to EBITDA 0.2x) for continued mergers and acquisitions and/or capital return initiatives, that should, in turn, lead to multiple expansion.

“ACEL is currently trading at ~2.4 turns below its historical average, on a 2023 basis, and at a ~2.2 turn EBITDA discount, and ~280 bps free cash flow yield discount, to the regional gaming peers in our coverage universe,” said Pizzella.