MECA: No slots means no Laurel, Pimlico upgrades

May 10, 2005 4:16 AM

After more than a decade of watching its two premier racetracks — Pimlico and Laurel — deteriorate, Maryland officials welcomed news that a majority interest in the Maryland Jockey Club was being acquired by Frank Stronach’s Magna Entertainment Corp. (MECA).

They were even more heartened to hear Stronach outline his renovation plans for the two tracks, especially for Pimlico Race Course, the home of the Preakness Stakes that will be run on Saturday, May 21. And, Stronach added that he would go forward with the plans regardless of whether the state authorized the tracks to install video lottery terminals.

But that was not to be. Last week, a Magna official warned that without slot machines the company would probably stop "investing any significant sums" in the tracks.

It was not unexpected since the company has been a loser almost from the time it was formed as an offshoot of Stronach’s Canadian auto parts manufacturing company.

In its most recent fiscal report, Magna, owner and/or operator of a dozen North American racetracks saw its revenues drop from last year’s $292 million to $252 million and earnings fall into the red ink category of $4.1 million compared to last year’s profit of $21 million. Per share loss was $0.04 while last year’s profit was $0.19 per share.

The company blamed inclement weather in Southern California where it operates Santa Anita and construction disruption at Gulfstream Park in Florida that is being rebuilt completely.

Magna is hoping to install VLTs at Gulfstream, assuming the legislature resolves its differences and passes a bill that will permit their operation and looks to Maryland to reverse its inaction of three years and authorize the slot machines.

LAS VEGAS SANDS

Excluding non-recurring charges, Las Vegas Sands Corp. (LVS), beat not only its comparable quarter but also topped analysts’ estimates, yet, investors were less than impressed and pushed the company’s share price to lows not seen since the company went public.

For the quarter, the company said net income, after charges, was $7.1 million or $0.02 per share compared to last year’s $49.9 million or $0.15 per share. The charges taken against earnings included the loss on disposal of assets, development expenses and a loss on early retirement of debt. Also, the company made a $5 million donation to the Solomon R. Guggenheim Museum.

Also questioned by analysts were the results of the company’s Macau operation. Casino revenues for the quarter in Macau were $171 million with operating income reaching more than $60 million. But one analyst criticized the operation’s cash flow saying it fell some 15% below what he had expected.

Bill Weidner, president and COO, disagreed. "We have a solid market position in Macau and trends remain positive across the board. Win per customer is improving and our VIP business, which we formally launched in March, is growing nicely."

Another factor affecting the share price of LVS, as well as Wynn Resorts Ltd. (WYNN), was a research paper from an analyst with Prudential Equity Group that political problems between China and Taiwan could interfere with visitations by Chinese residents to the Macau gambling haven. He questioned weather there would be enough incremental growth in visitations to absorb the rapidly expanding growth of gaming in the area.

MTR GAMING

Only three weeks of operation experience for Binion’s Gambling Hall and Hotel in downtown Las Vegas was included in the first quarter fiscal report offered Monday by MTR Gaming Group (MNTG).

For the period that ended on March 31, MTR Gaming reported a slight decrease in net income that was $2.9 million or $0.10 per diluted share compared to $3 million or $0.09 per share in the first quarter of 2004. Part of the decrease was blamed on slot operations at Mountaineer Park and Casino in West Virginia. Slots revenue was based on a net win per day per machine of $214 compared to last year’s $220 per day.

Nevada properties, including three weeks at Binion’s and the full period at the Speedway Casino in North Las Vegas, generated $5.2 million in total revenues and $872,000 in EBITDA with about $400,000 of such revenue attributable to payments received under a joint operating agreement with Harrah’s Entertainment Inc. (HET). Harrah’s turned over the Binion operation to MTR Gaming on March 10.

Based on current business levels, the company expects second quarter income of between $2.9 million and $3.4 million on revenues ranging between $98 million and $102 million.