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Mandalay’s new dividend boosts Wall Street’s view of gaming

Jun 17, 2003 6:05 AM

All it took was an announcement from Mandalay Resort Group (MBG) that it would begin paying a quarterly dividend, to cause many of the major gaming company stocks to spike upward.

For Mandalay Resort Group, the shares rose from the $30 level a week ago to just over $34 on Monday.

The company said that beginning Aug. 1, it would pay a 23-cent quarterly dividend to shareholders of record on June 26.

This prompted a number of analysts to suggest that because of the huge cash flows generated by gaming companies that others would soon follow the dividend initiative.

MGM MIRAGE Inc. (MGG) saw its shares rise in direct proportion to Mandalay Resort Group, reaching $35.03 from the previous week’s $31.88. Also moving upward were Harrah’s Entertainment Inc. (HET), going from $41.10 to $43.76 and Park Place Entertainment Corporation (PPE) from $8.25 to $8.68.

Also showing substantial strength were the shares of Station Casinos Inc. (STN), although the reason may have been more because of the successful opening of a new Indian casino near Sacramento, Calif., that the company is operating. The shares moved from $22.80 to $25.10 in one week. On Monday, the price fell a shade to $24.89.

Another mover was International Game Technology (IGT) that was in the low $90 level before reacting to heavy buying that moved it to $97.41. The company had announced that it also would be paying a dividend.

The dividend moves resulted from recent tax legislation that cut the federal dividend tax.

Following MBG’s dividend announcement, a number of gaming analysts raised their ratings on Mandalay, MGM MIRAGE and Station Casinos.

Another legend

For the past couple of months, southern California, and even Las Vegas, have been flooded with billboards featuring the image of singer Kenny Rogers promoting the $215 million Thunder Valley Casino in San Diego County for the Barona Tribe of Indians.

Apparently, the promotion has been deemed successful since a competing tribe, the Pala Indians, who also operate a casino in San Diego County, has signed up the American music and television legend Dick Clark as their celebrity image.

The Palas will be opening a $105 million expansion to their existing casino on Aug. 19. The expansion will include two state-of-the-art live entertainment venues, the Grand Cabaret and the Palomar Starlight Theater. It was these facilities that attracted Dick Clark to the property.

"When I first visited Pala to see what type of expansion they were planning, I was truly impressed with the beauty of the project," Clark said. "As a result of that visit, I knew I had to be affiliated with Pala and assist with its vastly expanded entertainment program."

There was no immediate indication that Clark’s affiliation would include visibility in their advertising program but judging by the success of the Rogers’ ads, a major advertising blitz would not surprise the gaming community.

Strategic partner

The European company bought only a small portion of Wynn Resorts, Limited (WYNN) but the arrangement was called a strategic marketing alliance.

Societe des Bains de Mer, better known as the operator of the casino in Monaco, last week announced it planned to purchase three million shares of Steve Wynn’s company for $45 million, or $15 a share. The amount represented 3.6% of WYNN outstanding shares.

In making the announcement, the companies said it had agreed to a strategic alliance that will include an exchange of management expertise and the development of cross-marketing initiatives.

"Monaco is one of the most recognized leisure destinations in the world and is well-known for its casino operations," said Wynn. "This transaction coupled with our Las Vegas and Macau developments enhances our global marketing efforts at Wynn Resorts."

President named

Donna Graham, a senior East Coast gaming executive for a number of years, has been appointed president of the Atlantic City Hilton by Park Place Entertainment Corp. (PPE).

She most recently was executive vice president of operations at the company’s Caesars Atlantic City property. The opening was created by the resignation of Leonard DeAngelo who cited an interest in pursuing new business opportunities for his departure.

Graham has been with Park Place Entertainment, serving as the company’s chief financial officer for the region. She began her career at the Hilton, formerly known as the Golden Nugget.

Power deal

Station Casinos Inc. (STN) has made a deal to buy all the electricity used by its eight Nevada properties from Coral Power LLC, an affiliate of Shell Oil. The arrangements will begin in October.

Under the agreement, Station Casinos will receive electricity delivered by Coral at a fixed rate using Nevada Power’s distribution system.

The arrangement was made possible when Nevada state regulators authorized Station to buy electricity from Nevada Power Co. competitors.

Station Casinos said the Coral agreement "removed significant volatility in our energy costs and will have the further benefit of reducing our local customers’electricity bills."

Internet conviction

There have been just a few prosecutions in the U.S. of individuals involved in Internet gambling with so-called offshore companies. But, one of the largest, occurred in Wisconsin where eight people were indicted for allegedly running an online betting service that was based in Wisconsin but operated from the Dutch Netherland Antilles.

Identified as the company lawyer, David Tedder of Florida was convicted of conspiracy to violate the Wire Wagering Act; conspiracy to launder more than $10 million in gambling profits and two other money laundering counts. The jury also ordered that he forfeit $7.3 million in assets.

The convictions on the gambling conspiracy counts would put him in jail for five years while the money laundering counts carry potential sentences of 10 years incarceration.

Allegedly, Tedder created shell corporations and offshore bank accounts for Gold Medal Sports to help the company’s owner, Jeff D’Ambrosia of Henderson, Nev., hide his ownership interest. D’Ambrosia was sentenced in February to five years in prison for gambling and tax convictions.

Reno controversy

Judging by charges made by the Atlantis Casino Resort operators, gaming lobbyist Harvey Whittemore has been doing a little moonlighting in northern Nevada.

The issue revolves around the Old Reno Casino in Reno’s downtown. The tiny gambling hall, previously owned by Nevada Casinos Inc., an affiliate of the Peppermill Hotel-Casino, has been condemned by the city fathers. Atlantis officials contend that in January Whittemore acquired the property with an understanding that he would sell it to the city for $1.

After the transaction, Whittemore, the allegation continued, would be in possession of a gaming license that would have a grandfather clause, permitting it to be used for a new casino that would not be required to meet the state’s hotel room requirements. And since Whittemore doesn’t have a gaming license, he would assign the Old Reno’s license to the Peppermill owners.

Atlantis has filed a petition seeking court action to prevent the move while lawyers for Peppermill have filed motions to dismiss the petition as a bogus claim.

The Insider

GTECH Holdings Corporation (GTK) will report its first quarter 2004 earnings results in a conference call on Thursday, June 19, at 8:30 a.m. (EDT).

Isle of Capri Casinos Inc. (ISLE) will release its fiscal results on Thursday, June 19, but will hold a conference call on June 20.

DB Securities on Monday raised its rating on Alliance Gaming Inc. (AGI) from hold to buy.

BusinessWeek magazine has placed Shuffle Master Inc. (SHFL) on its list of the Hot Growth Companies.

Bill Grace of St. Joseph, Mo., has indicated to officials in Waterloo, Iowa, that he would be interested in redeveloping the closed Waterloo Greyhound Park should the town permit the addition of slot machines.

The Seneca Indian Nation, operators of a casino in Niagara Falls, N.Y., has selected the Buffalo Convention Center as the proposed site of the tribe’s second casino.

The Navajo Indian Tribe, whose reservation covers land in Arizona, New Mexico and Utah, is expected to once again vote to see if the tribe will permit the construction of casinos on their property. No date has been set as yet.

N.Y. Atty. Gen. Eliot Spitzer has called for the removal of management of the N.Y. Racing Association suggesting in an extensive report that the organization’s three tracks are staffed with crooks and scam-artists. The AG’s report has been characterized by NYRA Chairman and CEO Barry Schwartz as erroneous, incomplete and inadequate.

The American Gaming Association has designated Phil Satre, chairman of Harrah’s Entertainment Inc. (HET) and singer Tom Jones for induction into the Gaming Hall of Fame. The awards dinner will be held in Atlantic City on July 26.

Penn National Gaming Inc. (PENN) has raised its forecast for the second quarter revenue to $329 million from the previous $326 million. Earnings per share are expected to be $0.38 a share compared to the previous guidance of $0.33 a share.