The more I look at Argosy Gaming (NYSE:AGY), the more I like it. Sure, it's a mixed bag, with perhaps the industry's most valuable property in Lawrenceburg, Ind. (near Cincinnati), but also weak properties in the St. Louis and Kansas City markets. Further, the ridiculous gaming and admission taxes in Illinois continue to hurt and are an insult to its entry into the Chicagoland market a few years ago.

Those taxes dropped Argosy's full-year 2003 net income 27.7% to $51.7 million, or $1.76 on a per-share basis. But the company's success in Lawrenceburg has brought it from near dead to respectable player. With its improving financial strength, Argosy is taking advantage of its points-of-presence to build higher quality properties.

In December, the company opened a new barge at Argosy Riverside in the Kansas City, Missouri, market. For a time, Argosy played third fiddle with Isle of Capri (NASDAQ:ISLE) in a market dominated by Harrah's Entertainment (NYSE:HET) and Ameristar Casinos (NASDAQ:ASCA). But with its new facility, Argosy is capitalizing on its attractive location.

Argosy also recently opened a new barge in the high-demand and severely under-supplied Chicagoland market. However, its capital-spending plan was cut short by a tax hike that two summers ago raised the ceiling in Illinois to 50%. Following this past summer's hike that brought the top rate to 70% and raised admission fees, the property was forced to reduce hours, charge admission, and alter the composition of its product offering to maximize profits rather than satisfy customers -- a predicament both Penn National (NASDAQ:PENN) and Harrah's dealt with.

A full 50% of the slot machines across Argosy properties are now Ticket-in, Ticket-out (TITO), with another 25% TITO capable and awaiting approval in Illinois (they have the guts and ticket dispensers, but still spit out coins), the operational and gaming experience benefits of which I explained a few months ago. The company expects to be 100% TITO by the end of 2004.

Argosy is shareholder friendly as well. On its website, management provides investors a monthly revenue breakdown for every market in which it competes. This is the only casino operator I am aware of that does so, and it might not be a bad act for other companies to follow.

At its current price at about $27 per share, Argosy trades at an enterprise value at 7.1 times Argosy's beaten-down 2003 EBITDA of $224.5 million, and 6.2 times 2002 EBITDA of $257.5 million. While the first figure seems pricey (Harrah's will pay 7.2 times EBITDA for the premium Horseshoe Gaming properties and brand), there are a things to consider long term:

The new KC-market barge should be a much bigger cash contributor beginning this year.

Further efficiencies will be gained with the use of TITO slots.

Most importantly, the current, absurdly counterproductive regulatory environment in Illinois simply can't last forever -- and not just the position limit and 70% top tax rate, but also the 50% tax rate as well.

With those things in mind, I'd venture that Argosy's current price tag is probably within a reasonable range. However, I also say that if you're looking to play in this field, I'd look elsewhere. My own investment preference is still Ameristar. It's the stronger, cleaner power play with a more attractive price at about 5.8 times 2004 EBITDA, a P/FCF multiple of less than nine, and EV/FCF multiple around 17.

Venture your own thoughts on the Argosy discussion board.

Jeff Hwang owns shares of Ameristar Casinos, and can be reached here.