Cirsa – An Underappreciated Gaming Asset – Part 1.0

Thesis & Overview

What is Cirsa?

• Cirsa (private) is one of the largest global omnichannel casino operators in Spain, Italy and Latam. The company was founded by Manuel Lao Herandez in 1978 and was sold to Blackstone for €2.2B (~6x EV/EBITDA) in 2018, with the Argentina business carved out and remaining under the control of the Lao family. The company operates 447 casino halls, 36k slots, 654 tables, and 8 online casinos in regulated markets such as Spain, Panama, Colombia (50% JV), Mexico, and Italy. The company is currently contemplating an IPO plan to list on the Madrid stock exchange with net proceeds rumored to be used for deleveraging (3.9x/4.4x OpCo/Total Consolidated Net-Leverage as of 4Q24).

Our Thesis

1. Cirsa is a market leader in digital gaming in Spain, and expansion in Latam should position the company for further growth.
2. Land-based casino and slot business in Europe will provide sufficient FCF needed to grow in Latam.
3. Land-based casino/slots operations in Latam provide multiple touchpoints to build a customer database and acquire customers at an attractive ROI.

Valuation

• Our SOTP suggests the Company is worth 7.0x EV/EBITDA. We valued land base operations at a blended 6.5x while applying a 10x multiple on the digital business.

Risk

1. Value-destructive M&A
2. Changing regulatory environment in Latam/Europe
3. Weak consumer demand due to the Trade War
4. Heightened competition in digital gaming from better-capitalized global and local competitors

The TLDR: We like Cirsa given its leading online gaming position in Spain. We believe the company is well positioned to compete in Latam as it can leverage its existing slots halls and casinos to further penetrate the online gaming segment.

Valuation – Sum of the Parts

Overview

• While Cirsa is currently a private company, the following SOTP analysis provides a framework to estimate the potential equity valuation necessary to achieve a minimum return for Blackstone. For this exercise, we assume a minimum IRR of 15%.
• IPO and Rumor Valuation. According to market chatters, Blackstone is considering an IPO for Cirsa, potentially selling 20–25% of its stake for €745m–€1.1B. The rumored valuation implies an enterprise value of ~9x EV/EBITDA.
• What is Fair Value? We believe the fair valuation for the business is a blended 7.0x EV/EBITDA using our SOTP analysis. For the Casino Business, we assign a 7.0x multiple reflecting strong EBITDA growth potential but offset by elevated regulatory risk. For Digital, we valued at a 10x multiple given Sportium’s leading position in Spain. For Slots, given elevated taxes in Italy, we ascribe a low 3.0x multiple; Spain slots at ~6x.
• Sensitivity Analysis. The primary valuation debates center on ascribing the appropriate multiples for Casino and Digital businesses. We believe Blackstone can achieve its 15% IRR target assuming the casino gets valued at a minimum of a 6.0x multiple.