Boasting a leading share in three out of four regional markets, but posting the lowest cash flow rates among the Big Four, Park Place Entertainment is a company in transition.
“The near-term earnings outlook is mixed,’’ says John Kempf of Goldman Sachs. “We do not expect significant improvement next year.’’
But Kempf and other industry analysts say patience is in order.
“The company remains free cash flow positive, and we expect the majority of this cash flow to be used to repay debt,’’ he says.
Meantime, Park Place isn’t exactly standing still. Chief financial officer Harry Hagerty, in a briefing at the Global Gaming Expo, noted that the company is pursuing a three-pronged strategy involving Indian casinos, international markets and Internet gaming.
Park Place, which has more casinos than any other gaming company, is seeking state approval for its deal with the St. Regis Mohawk tribe in the Catskills, 90 miles outside New York City. It’s also actively exploring options in “major markets” around the world. On the Net, the firm hired Frank Han, former head of the now-defunct e-Toys, to lead interactive ventures.
While Goldman Sachs retains a “neutral” rating on Park Place stock, the casino company is hopeful that the forthcoming Ocean One mall in Atlantic City will drive new business through Caesars on the Boardwalk-much like the Forum Shops did for Caesars in Las Vegas.
And speaking of Caesars, the opening of the 4,000-seat Colosseum next spring is expected to boost traffic and room rates at the fabled resort.
“Park Place is currently going through a major transition-from a company that has grown aggressively through acquisitions and expansion, to a stable earnings generator with growth driven by small expansion projects, cost reductions and debt reduction,’’ Kempf explains.
Hagerty affirmed that his company is serious about economy and efficiency, noting that one of its Strip properties recently trimmed labor costs 10 percent through computer modeling that meticulously matches staffing levels to customer demand.
“The Las Vegas properties are slowly improving,’’ Kempf observed.