Station
Casinos Expect to Exceed Projections
Wall Street analysts
jumped on the Las Vegas locals market bandwagon
Thursday after Station Casinos announced third-quarter
earnings exceeded earlier projections, thanks
to the strength of the local economy.
In a Securities and Exchange Commission
filing, Station said third-quarter revenue growth
at its major Las Vegas operations should at
least hit the top range of the 8 percent to
11 percent guidance previously provided by the
company.
"Bottom line, the quarter is shaping up
very nicely," Station Chief Financial Officer
Glenn Christenson said.
There have been concerns about performance
stemming from gasoline price increases and Hurricane
Katrina, but Christenson said his company's
business is still very strong because of the
resilience of the Las Vegas locals market.
While the company did not raise guidance with
a specific projection, Deutsche Bank analyst
Marc Falcone said he now estimates Station's
results will exceed the top end, given continued
strength of Station's Jumbo Jackpot marketing
program, the performance of the Las Vegas economy
and the locals market demographics.
As a result of the filing, Bear Stearns analyst
Joe Greff said: "Station, in our view,
remains the best growth story with the most
visibility among the gaming operators."
He said the supply-demand dynamics in the locals
market plus a laddering of growth projects that
goes through 2010 contribute to the upward revisions
in estimates of Station's performance.
Station also released new estimates placing
the value of its nonrevenue producing land as
high as $1.3 billion.
"Our land holdings are a key component
of our stock values. As we've accumulated more
property over time, we felt a need to inform
investors about the value placed on that property,"
Christenson said.
The initial acquisition cost of 489 acres in
land-banked property in Nevada was placed at
$188 million.
Station also owns 67 acres of land at Wild
Wild West, which cost $149.6 million and 40
acres of excess land associated with its current
hotel-casino operations.
In addition, Station has advanced approximately
$149 million toward the development of future
tribal gaming projects, which it believes will
be repaid from either the financing or the operation
of these projects.
CB Richard Ellis provided new estimates for
the land in Nevada and Robert Charles Lesser
& Co. provided estimates for the land in
California.
Investors previously were left to depend on
acquisition costs to evaluate the value of the
company.
Analysts said the announcements bode well for
Boyd Gaming Corp. as well.
"We believe that Boyd should also benefit
from this continued Las Vegas locals growth,
so we're currently projecting 9 percent (third-quarter)
revenue growth for its Boulder Strip and Coast
properties," Falcone said.
Wall Street previously had estimated Boyd Gaming's
third-quarter revenue growth at 7 percent.
Station Casinos shares closed Thursday at $69.88,
up 0.49 percent or 34 cents on 600,000 shares
trading, slightly above normal trading volume.
Boyd Gaming closed at $48.08, down 0.23 percent
or 11 cents on 637,000 shares trading, just
below normal trading volume.
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