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J.M. Dutton & Associates: Century Casinos Strong Buy

The present valuation of Century Casinos' stock does not reflect the quality of the Company's management, evidenced by their industry experience, laudable performance, and the breadth and depth among the senior and middle management people. Groundwork has been laid at the Womacks Casino in Cripple Creek for an expansion program that should more than double the revenues of the casino within three to four years. Johannesburg should also add a meaningful increment to earnings in about the same time frame, assuming a favorable ruling on its gaming license this fall. The Company has sufficient capital from internally generated cash flow and the unused portion of its revolving credit facility to meet its expansion requirements. When Century's valuation ratios are compared to the mean ratios of the industry, the Company's stock is substantially undervalued by as much as 50%.

Forecast EPS rapidly escalate going forward. Fully diluted EPS of $.32 are forecast for 2003, versus the $.16 reported in 2001, with forecast total revenues of $36.4 million versus the $33.5 million reported in 2001. For 2002, total revenues of $34.4 million are forecast with fully diluted EPS of $.27. We point out that in most cases, the Company's operational statistics and profitability ratios significantly exceed industry averages, but its stock sells at substantial discounts to the average industry price ratios. This valuation discount, combined with its above industry performance, offers the opportunity for significant capital gains on market revaluation of this company.

Gerald LaKarnafeaux, CFA during the past 40 years, has held senior positions in international and regional investment banking firms as a securities analyst, portfolio manager, and director of corporate finance.

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