Station Casinos is looking for some respect. Though wildly popular in America’s fastest growing metropolitan area, "the locals’ favorite" isn’t getting much satisfaction on Wall Street these days.
"The [Las Vegas] market is expected to grow 50 percent by 2010 and we’re getting an 18 percent return on investment,’’ says Station Chief Financial Officer Glen Christenson. But even with a cash flow that beats some of the biggest names in gaming, Station’s stock performance remains anemic.
"It’s a total disconnect,’’ Christenson says.
To boost profits, and put some diversification back into its portfolio, Station has entered into a joint venture with the United Auburn Indian Community to build a casino outside of Sacramento, Calif. Thunder Valley Station Casino will sit in the midst of a metro market of more than 4 million people.
Due to open in the fourth quarter of next year, the $215 million Auburn project will start with up to 2,000 slots and 100 table games-and pose a significant threat to the Reno market. Its ratio of 1,500 adults per gaming position would rank among the best in the country.
Because tribal gambling halls run tax free, Christenson looks for cash flow margins in the range of "50-plus percent."
Industry watchers credit Station for reducing its debt by $70 million this year. But much debt remains, and analysts are wary of the company’s bonds. A traditionally soft third quarter-along with a possible 0.25 percent hike in Nevada’s gaming tax-won’t help matters much.
To keep the number crunchers happy, Station plans to sell $10-$15 million in land it owns around the Las Vegas Valley. With some 300 acres in hand, Station has more gaming property than any of its competitors.
Meantime, Station has entered into an agreement to pay $65 million for the rights to 73 acres at Charleston Boulevard and the I-215 Beltway in Summerlin. The company has not indicated when it plans to develop that property. Analysts believe it is at least two years away.