Business booming at Steve’s place

Jun 7, 2005 5:07 AM

Steve Wynn patiently refrained from commenting as one after another Wall Street gaming analyst suggested clients divest themselves of shares in Wynn Resorts Ltd. (WYNN) and, in fact, viewed the entire Las Vegas scene with skepticism. Apparently, many of their clients agreed and sent the Wynn shares tumbling to low to the middle $40 level.

To their chagrin, Wynn last week released the financial experience for his Las Vegas Strip property for the first 34 days of operation and just blew the detractors out of the water.

Combined revenues for the period approached the $141 million level or slightly more than $4 million per day. Gaming revenues were given as $64.3 million while non-gaming revenues, including $15.4 million in complimentaries, totaled $76.6 million. Analysts had estimated that gaming win for the first full-quarter would be $68.2 million.

The strong non-gaming revenues were triggered by an average daily room rate of $308 with occupancy averaging 91%.

Marc Falcone, chief gaming analyst for Deutsche Bank, viewed his colleagues’ poor call on WYNN shares with the comment, "Maybe investors are realizing that the performance of the property isn’t as bad as people originally believed."

And respected analyst Harry Curtis of J.P. Morgan, added, "Recent skepticism has created a very attractive opportunity for investors with a two to three year horizon."

Investors agreed, pushing the price of WYNN shares to the $55 level.

In revealing the property’s 34-day experience, Steve Wynn remarked, "We are delighted with our first full month of operations, but we are reminded that opening a resort of this caliber and this scope is a daunting challenge. As the weeks progress and our opening and startup challenges are met one at a time, operating efficiencies will emerge. This process is far from over and will take several months. The early results should be measured accordingly."

The property’s goal of dealing to the high-end market was evident in the large amount of non-gaming revenues as well as the table games segment of gaming revenues. The tables generated $42.7 million, representing a per-table win per day of $9,244. Total revenues produced by the slot machines totaled $20.2 million or $304 per unit per day.

Described as a work in progress was the property’s featured entertainment production called "Le Reve." While the show is undergoing modifications, only one show a day has been scheduled rather than the previously announced two shows a day.

It was estimated by observers that the immediate success of Wynn Resorts also enhanced business at other major Las Vegas properties. Investors responded favorably to these companies as well giving nearly all gaming shares a boost.

Another sale

Preparing for the approaching acquisition of its properties by Harrah’s Entertainment Inc. (HET), Caesars Entertainment Inc. (CZR) completed the sale of its interest in the company that owns and operates two Nova Scotia gaming properties — Casino Nova Scotia Halifax and Casino Nova Scotia Sydney — for $70 million.

Great Canadian Gaming Corporation of British Columbia is purchasing a 95% ownership interest in Metropolitan Entertainment Croup of Nova Scotia. The company operates the two casinos under an agreement with the government-owned Nova Scotia Gaming Corporation.

The larger of the two casinos is in Halifax. It features 750 slots and 41 tables games while the property in Sydney has 387 slots and 11 table games.

Harrah’s said it expects to close on its takeover of Caesars on Monday, June 13.

Tax rollback

Faced with the prospect of reduced tax revenues come July, Illinois legislators moved last week to ensure that the revenues achieved with the highest gaming tax rate in country during the past two years continue.

Although it sounded like the lawmakers were reducing the tax rate, the bill provides that tax revenues must not decrease under the new law. If the amount to be paid in the next two years is lower than what was paid in 2004, the difference must be made up by the casinos.

The new rolls back the tax rates to the levels that existed in 2003 and also reduces the admission head tax from $4 and $5 to $3.

Meanwhile, the state gaming regulators are continuing their effort to revoke the state’s 10th riverboat license that has been held by Emerald Casino Inc. But on Friday, Emerald lawyers asked the court to intervene and prohibit the Illinois Gaming Board from continuing the revocation hearings. A court ruling on the matter is expected this week.

If the license is revoked and reverts to the state, it is expected that the state will conduct an auction to maximize the license’s value.

New directors

Alliance Gaming Corp. (AGI) has announced the election of Stephen Race to the company’s board of directors as an independent director effective at the end of this month.

Race, whose experience has been in both the entertainment and software fields, most recently served as interim CEO of Full Degree, an enterprise software company.

At Youbet.com Inc. (UBET), two new directors were elected at the company’s shareholder meeting last week.

Elected were: Doug Donn, former CEO of Gulfstream Park, the Florida racetrack that was operated by the Donn Family for a half-century, and Jack Leibau, president of Bay Meadows Racing Association and a former executive with Magna Entertainment Corp. (MECA).

THE INSIDER: Directors of Canterbury Park Holding Corp. (ECP) have declared a special cash dividend of $0.25 per share of common stock payable on July 8 to shareholders of record on June 17.

Analysts at CIBC World Markets have raised their rating of WYNN Resort Ltd. (WYNN) to sector outperform from sector perform. They also downgraded the share of Aztar Corp. (AZR) from sector perform to sector underperform.

Legg Mason analysts have initiated coverage of shares in Las Vegas Sands Corp. (LVS) with a "buy" rating.

And at Banc of America Securities, analysts have raised their rating on GTECH Holdings Inc. (GTK) from "neutral" to "buy."

Station Casinos Inc. (STN) announced the sale of $200 million of 67/8% senior subordinated notes due March 1, 2016.

MGM MIRAGE Inc. (MGM) said it has begun construction of a $975 million hotel/casino in Macau. The company is a partner in the project with Pansy Ho Chiu-king, daughter of Hong Kong gaming tycoon Stanley Ho.

Scientific Games Corporation (SGMS) announced that it was awarded a contract for instant lottery tickets by the state-authorized lottery of Portugal. The contract was valued at $3.5 million.

Isle of Capri Inc. (ISLE) has purchased a former discount store in Vicksburg, Miss., in order to convert the building into the company’s casino offices. The renovation is expected to cost about $300,000.