The games continue. Following a strong fourth-quarter report last week from Wynn Resorts
Let's start with the positive.
MGM Mirage's eventful Q4
MGM Mirage had a fairly eventful Q4. The company opened its new permanent gaming facility at MGM Grand Detroit on Oct. 2, and opened the 50%-owned MGM Grand Macau in partnership with Pansy Ho on Dec. 18. The company also announced plans for the $4.5 billion to $5.0 billion MGM Grand Atlantic City.
Meanwhile, MGM Mirage completed the sale of 14.2 million shares of stock to Dubai World for $1.2 billion, and closed on its contribution of Project CityCenter to the new MGM Mirage/Dubai World CityCenter joint venture in exchange for $2.96 billion.
That CityCenter transaction would add $2.23 per share to quarterly earnings.
The company played a fountain of numbers in its press release, including a variety of earnings figures accounting for or excluding condo sales, hurricane insurance recoveries, pre-opening expenses, etc. But looking at the meat and potatoes, net revenues were up 4% to $1.9 billion driven by a strong performance on the Las Vegas Strip, as well as the heightened performance at the MGM Grand Detroit property. However, on a comparable basis (excluding all one-time items), the company said that overall property EBITDA was down 1% due primarily to new labor contracts in Las Vegas and Detroit.
Also, excluding insurance recoveries, the company said that the Beau Rivage in Biloxi posted a slight EBITDA decline due to the reopening of competition along the Mississippi Gulf Coast.
But the Las Vegas Strip properties turned in solid performances. High-end baccarat play was up 17% there, leading to a 2% increase in gaming revenue. Meanwhile, Strip revenue per available room (REVPAR) was up 4%, food and beverage revenues were up 7%, and entertainment revenues climbed 8%.
Going forward, however, the company is cautious about the near term, forecasting a slight year-over-year decline in first-quarter REVPAR. On the conference call, CFO Dan D'Arrigo said, "We are definitely seeing the effects of a weakened economy. It's mostly prominent in markets outside of Las Vegas and to some degree, our mid-market properties in Las Vegas."
Which brings us to Ameristar.
Ameristar has rough Q4
The high-end Strip players such as Wynn Resorts and MGM Mirage have held up well through Q4, but regional casino operators are really feeling the pain of the recent economic downturn. Ameristar Casinos has been no exception.
Overall net revenues increased 24% to $302.8 million this quarter, which was due entirely to addition of the recently acquired Resorts East Chicago property; same-store revenues declined 2.3%. The company cited three negative factors:
- "General softening of overall economic environment."
- Severe weather: The company said it suffered from three times as many bad weather days with an estimated EBITDA impact of $3 million to $3.5 million.
- Construction disruptions at St. Charles and Vicksburg properties: The impact to EBITDA at Vicksburg was between $1 million and $1.5 million for all of 2007, most of which occurred in Q4.
Ameristar Black Hawk, near Denver, had a strong showing, posting a 23% gain in EBITDA. But on a brighter note, the company finally opened the first 100 hotel suites at its flagship Ameristar St. Charles (St. Louis) property, and now has 159 suites open, with all 400 expected to be ready for guests in May. On the earnings conference call, the company noted that the hotel has experienced a 95% occupancy rate.
The St. Charles property does have a new competitor to contend with, however, in Pinnacle Entertainment's
And the near-term future doesn't look any brighter. The company said that it expects economic conditions to remain challenging in 2008, and anticipates that "the first half of the year will be a period of difficult same-store year-over-year comparison."
Meanwhile, Ameristar will no longer provide guidance or expect financial results because of "competitive conditions," especially as two competitors -- Harrah's Entertainment and Penn National Gaming
Casino stocks have been taking a beating. And in this weakened economy, near-term business prospects are sluggish. But as I said last week, this looks like a good buying opportunity for long-minded, value-oriented investors. I think both MGM and Ameristar fit the bill.
Despite its challenges, Ameristar has limited downside as a well-positioned, neatly packaged takeout target for a company such as MGM Mirage or Boyd Gaming
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