Like most of its rivals, regional casino operator Isle of Capri
While Isle of Capri continues to benefit greatly in Mississippi and in Louisiana because of the absence of competitors destroyed by Hurricane Katrina, its performance was hurt by new or expanded competition elsewhere.
The upside: Biloxi, Natchez, and Lake Charles
In Mississippi and Louisiana -- where the competition is still reviving in the aftermath of Katrina -- Isle is riding high. In Biloxi, the company saw revenues more than double to $52.9 million, while adjusted EBITDA of $22.6 million was almost six times the $3.8 million in adjusted EBITDA the property recorded in last year's quarter. The Natchez property (also in Mississippi) also posted healthy gains thanks to Katrina-related population shifts. And in Lake Charles, La., where Harrah's
The flipside: Iowa, Kansas City, and Black Hawk
In Iowa, Isle's three properties combined to report a 6.7% decline in net revenue and a 14.1% decline in adjusted EBITDA due to the presence of new competition.
The Kansas City property showed only a slight decline in net revenue, but a 30% drop in adjusted EBITDA. That property's performance was hurt by renovations at competing properties, namely Harrah's North Kansas City and Penn National Gaming's
The Black Hawk properties in Colorado also underperformed company expectations. Despite having their own recent upgrades, these properties showed a decline in adjusted EBITDA and only marginal revenue growth. The lackluster numbers may stem primarily from the introduction of the expanded and rebranded Ameristar
The company did note increased marketing expenditures in that market, as well as disruptions at one of its properties because of conversions to ticket-in/ticket-out (TITO) capable slots.
The competition only gets stiffer
With Harrah's Grand Casino Biloxi now online and MGM Mirage's
Personally, I find this difficult to believe, particularly given Isle's poor history in the face of competition. That lack of competitive strength is evident in Kansas City, as well as Vicksburg and Bossier City -- two markets in which the company cashed out at the beginning of the current quarter. Black Hawk, Isle's biggest EBITDA contributor pre-Katrina, is also a question mark, now that the company has real competition from Ameristar. The rival casino firm is only just getting started, with a new 536-room AAA four-diamond quality hotel on the horizon.
Better opportunities elsewhere
At this point, while there are some interesting new projects on the horizon in Florida and Mississippi, I still see Isle of Capri as little more than a fringe player. That said, despite hitting a new 52-week low, I'd prefer to avoid the stock altogether -- especially since premium players such as Harrah's, Ameristar, MGM Mirage, and Station Casinos
For related coverage, check out:
- A Star in Colorado
- Gaming Roundup: Harrah's, Penn National Disappoint
- Gaming Roundup: MGM Mirage Strip Strong
- Is Station Casinos a Buy?
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