Apparently, Station Casinos
The earnings figures weren't too shabby, either. Ameristar posted earnings of $18 million, or $0.32 per share, blowing away analyst estimates of $0.24 per share. Despite the company's including $0.02 per share in stock-options expense (a figure not accounted for in last year's quarter), earnings rose 8.3% from $0.29 last year. Net revenue inched up 3.2% to $246.6 million, thanks largely to the performance of the recently rebranded and renovated Ameristar Black Hawk property. Also, EBITDA climbed 0.7% to $63.5 million, accounting for $2.1 million in stock options expense.
Ameristar Black Hawk
Ameristar Black Hawk -- rebranded and reintroduced on April 1 -- has started to pay dividends. With an expanded gaming floor featuring 1,600 slot machines, net revenues at the Colorado property jumped 53.4% to $21.3 million. This helped boost its market share in the 22-competitor market 4.7 percentage points to 15.4%. And EBITDA more than doubled to $5.1 million.
Ameristar Vicksburg also posted healthy gains, as net revenue climbed 16.5%, helped by heightened business in the Vicksburg market caused by casinos temporarily closing along the Gulf Coast because of Katrina. The revenue boost resulted in a 27% jump in EBITDA to $13.5 million. Meanwhile, the Mississippi property maintained its market-dominating 46.5% share among four competitors.
The Jackpot properties in northern Nevada reported a 7.3% gain in net revenue to $17.5 million, along with a 28% gain in EBITDA to $4.7 million.
The improved business in those three markets more than offset the difficulties at the company's flagship Missouri properties, as well as in Council Bluffs, Iowa. There were slight increases in revenue and EBITDA at Ameristar Kansas City, and there was a 2.2% decline in net revenue and a 1.1% decline in EBITDA at Ameristar St. Charles. Continued aggressive promotional spending by chief rival Harrah's Entertainment
The situation in Kansas City and St. Louis is fairly unusual, with two top-of-the-line competitors vying for the same customers from nearly identical locations. As a side note, I believe that the remote location of Pinnacle Entertainment's
Meanwhile, Ameristar Council Bluffs is feeling the effects of the expansion and introduction of Harrah's newest Horseshoe Casino (formerly Bluffs Run), which opened in March. Net revenue at Ameristar Council Bluffs fell 9.5% to $42.8 million, while EBITDA dropped 21% to $13.9 million. The company did manage to maintain a "fair share percentage" -- 106.3% -- of gross gaming revenues (a comparison of revenues per gaming position relative to the total number of gaming positions at all competitors in the market). A fair share of more than 100% means the company is getting more than its fair share of business per gaming position; I expect this to continue, because Harrah's other property in the three-competitor market is essentially a non-competitor at the moment.
The share-repurchase program is a plus because it gives Ameristar management some flexibility to deliver shareholder value. Management had shied away from buying back shares because the company was committed to using its capital to invest in its properties and other growth opportunities. But with the failed acquisition of Aztar
And with Ameristar now maturing and the stock at levels not seen since the end of 2004, I think buying back shares has become an attractive option for creating value in the interim. I should note that management is squarely on the shareholders' side, as CEO Craig Neilsen still owns more than half of the company -- or, as Warren Buffett might put it, "we control the company between the two of us."
An encouraging quarter
The bottom line is that the quarter was better than it could have been. The performance at the Black Hawk and Vicksburg properties is very encouraging; Ameristar Black Hawk is just getting started, and the company recently began construction of a 536-room, AAA Four-Diamond quality hotel that will take the Black Hawk market to a new level.
I believe that Ameristar Vicksburg has a nearly unbeatable position in a market that Harrah's has already left, and Isle of Capri
I'm very optimistic about Black Hawk and Vicksburg. Kansas City and St. Louis probably require closer monitoring. And we'll discuss Ameristar's prospects in the Council Bluffs market in our next installment of the "Re-Evaluating Ameristar" series.
For related coverage, check out:
- Re-Evaluating Ameristar: Kansas City
- Re-Evaluating Ameristar: St. Louis Part 1 and Part 2
- Ameristar Faces Competitive Pressures
- Is the Gambling Industry Cyclical?
- Is Station Casinos a Buy?
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