5 Best Small-Cap Casino Stocks Hedge Funds Are Buying

2. Playa Hotels & Resorts NV (NASDAQ:PLYA)

Market Capitalization as of October 4: $1.05 billion

Number of Hedge Fund Holders: 24

Playa Hotels & Resorts N.V. (NASDAQ:PLYA) also known as “Playa” stands as a prominent proprietor, operator, and developer of all-inclusive resorts situated in highly sought-after beachfront locales across Mexico, Jamaica, and the Dominican Republic. Currently, Playa oversees a comprehensive portfolio, encompassing 24 resorts with a total of 9,097 rooms. These resorts operate under brands such as Hyatt Zilara, Hyatt Ziva, Hilton All-Inclusive, Tapestry Collection by Hilton, Wyndham Alltra, Seadust, Jewel Resorts, and The Luxury Collection.

According to Insider Monkey’s second quarter 2023 hedge fund survey, out of the 910 hedge funds analyzed, 24 of them had chosen to invest in Playa Hotels & Resorts NV (NASDAQ:PLYA). Notably, among these investors, Davidson Kempner, led by Thomas Lenox Kempner, emerged as the largest shareholder, holding a significant stake valued at $123.26 million.

In its investor letter for the second quarter of 2023, Silver Beech Capital provided a comment or statement concerning Playa Hotels & Resorts N.V. (NASDAQ:PLYA):

“Playa Hotels & Resorts N.V. (NASDAQ:PLYA) is a small-capitalization owner/operator of 25 all-inclusive resorts in Mexico (Cancun and Pacific Coast), the Dominican Republic, and Jamaica. Playa’s portfolio is branded (mostly Hilton and Hyatt), includes primarily luxury/upscale resorts, and operates at among the highest margins in the hotel industry. Playa’s resorts are irreplaceable assets in supply-constrained markets that continue to benefit from rising post-COVID international tourism.

We believe the public market discounts Playa’s shares based on recessionary fears, however, strong international flight data into Playa’s regional airport hubs do not support this view, and spot private market valuations for Playa’s hotels exceed its public market valuation. Management has demonstrated impressive capital allocation to address this valuation gap by moderating growth capital expenses for only the highest return projects and looking to sell select strategic resorts and repurchase shares at today’s attractive level. Over the last two quarters, Playa has repurchased more than 4% of the company’s outstanding shares. The company trades at a TEV/EBITDA of 7.6x (2023E), and a low double-digit free cash flow yield. We believe Playa’s intrinsic value is more than 50% greater than its June 30 share price.”