You don't need the risk tolerance of a riverboat gambler to find Argosy Gaming (NYSE:AGY) attractive. At this time last year, the riverboat casino operator was still recovering from the shock of a pair of tax hikes in Illinois. Since then, a couple of key expansion projects -- as well as across-the-board growth -- have helped drive the stock up from $23.50 per share to just more than $40.
Yesterday, Argosy reported third-quarter net income growth of 27.9% to $21.1 million, or $0.71 per share. That figure includes a one-time gain of $0.06 per share from the sale of one of the boats used at the company's Joliet property in the Chicagoland market before the new barge-based facility was introduced last year. Meanwhile, revenues climbed 9.7% to $266.5 million, pushing EBITDA (earnings before interest, taxes, depreciation, and amortization) up 13.5% to $71.6 million.
Each of the company's six casino operations reported revenue growth over last year, but the biggest gains came as a result of the $105 million expansion project completed last December at the Argosy Riverside in the Kansas City market, where the company competes with Harrah's Entertainment (NYSE:HET), Isle of Capri (NASDAQ:ISLE), and Ameristar Casinos (NASDAQ:ASCA). With the new single-level barge in place, Argosy Riverside posted net revenue growth of 53.3% to $34.8 million, helping property EBITDA double to $10.6 million.
During the quarter, Argosy replaced its Sioux City, Iowa, riverboat with the larger boat previously used at Argosy Riverside. As a result of the 28% increase in capacity, the Sioux City operation managed revenue growth of 22.6% to 12.5 million. In September alone -- the first full month with the bigger boat in place -- revenues climbed 48% at the Sioux City property.
Elsewhere, Argosy's flagship operation in Lawrenceburg, Ind., (near Cincinnati) continued its market dominance. At that property -- arguably the most successful and dominant riverboat casino in the industry -- revenues grew 7.1% to $115.5 million, boosting EBITDA by 7.3% to $38.1 million. The Alton Belle, on the Illinois side of the St. Louis market, was the only property to report an EBITDA decline.
Overall, the results were good. And while the company doesn't fit my own personal investment criteria, one of our former Fools, Paul Larson, picked Argosy twice in our annual Industry Focus -- at under $14 in 2000 and at $16.25 per share in 2001. Argosy remains a solid niche player in this business despite government attempts to get its hands on the golden goose.
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Fool contributor Jeff Hwang owns shares of Ameristar Casinos.
