Even though Las Vegas visitor volume in
January fell below last year’s levels, analysts are encouraged by some
positive trends and are forecasting optimistic first quarter results.
For the month of January, visitor
volume to Las Vegas declined by 134,275 to 2,671,274 or 4.8 percent.
However,
the 2002 January failed to include Super Bowl weekend, which occurred Feb. 3,
and Chinese New Year’s. Thus, if Super Bowl were held in January, analysts
said Las Vegas would have easily surpassed last year’s visitor volume.
Analysts said the rescheduling of the
Super Bowl to February, coupled with a strong Presidents’ Day weekend, should
produce strong results for February.
Moreover, January’s “decline” in
visitor volume was the narrowest decline since the September 11 tragedy, and
“clearly show the continued rebound in the Las Vegas market,” according to
Bear Stearns’ analyst Jason Ader.
Other statistics that are showing
narrower declines is the air passenger traffic. In September, passenger traffic
was down 28.3 percent from last September’s volume, but those declines have
steadily decreased to only 10.2 percent in January.
Also
encouraging was the strong drive-in traffic from California, which increased by
12.1 percent in January.
Other
factors that have added optimism to analysts estimates include:
1.Better
marketing and lower overall cost structure,
2.regional
market strength,
3.mild
weather conditions,
4.lower
utility and gas prices,
5.consumer
confidence,
6.steadily
improving mid-week rates and occupancies.
Because of increased optimism, Bear
Stearns has raised its first-quarter estimates for the following gaming companies: MGM Mirage, Harrah’s Entertainment, Park Place Entertainment,
Ameristar, Penn National Gaming, Hollywood Casinos, Argosy Gaming and Aztar.
Bear Stearns said that Boyd Gaming and
Station Casinos have already posted
better-than-expected first quarter results.
“We believe the potential exists for
many of these companies to report additional upside above our recently revised
estimates, particularly owing to their historical track record of bettering even
the most optimistic trends,” said Bear Stearns analyst Jason Ader.
How
high are the “upside” results? According to Bear Stearns, the average gaming
stock is currently trading close to 90 percent of its 52-week high, with 10
companies exceeding 90 percent of their 52-week high.
Moreover, gaming multiples (EV/EBITDA)
are at or near historical highs with large-cap companies trading at an average
of 7.6X (2003), while small-cap companies are trading at 6.7X (2003).
“We have not seen these type of multiples, especially for the small-cap operators, since 1993-96, when riverboat gaming was coming to fruition in many states,” Ader said.
