Ameristar sees better quarter; share prices rise

Jun 24, 2003 6:40 AM

Smaller gaming companies, particularly Ameristar Casinos Inc. (ASCA), had their moment in the Wall Street spotlight on Monday, even while some of the larger companies were experiencing modest declines.

Ameristar Casinos, based in Las Vegas, but operating primarily in Missouri and Iowa, saw its shares rise 8.36% to $20.75 a share midway in the trading day, an increase of $1.60. Just a week ago, the shares were trading at around $18 each. By day’s end on Monday, with most indices down including the Dow, Ameristar was listed at $20.20, an increase of $1.05.

Also showing strength in Monday’s trading activity were Station Casinos Inc. (STN) whose shares closed at $24.67, an increase of $0.38 for the day.

And Argosy Gaming Inc. (AGY) reached $19.88, an increase of $0.42. The biggest gainer, dollar-wise, was International Game Technology (IGT) which closed at $98.12, a jump of $2.65

Positive action on Ameristar Casinos’ shares followed an announcement by the company that it increased its guidance for the second quarter ending on June 30. The company said it expected earnings for the quarter to be between $0.45 and $0.47 a share. This was substantially higher than the previous guidance for the period of between $0.31 and $0.35 a share.

On average, Wall Street analysts had expected the company’s earnings to be in the $0.40 range.

Although no specific reason was given for the improved guidance, the company’s recent experience in Missouri, especially with its new Ameristar St. Charles facility, reportedly showed major improvement during the month of May, according to reports from regulators.

During the first quarter of the year, the company reported earnings per share of $0.44 compared to $0.57 a share during the corresponding period of 2002. A number of factors, including adverse weather, construction disruption and the Iraqi war, were cited. At the time, however, Craig Neilsen, company founder and CEO, noted that "our strategic revenue enhancement and cost reduction initiatives are proving to be successful. We are confident that these strategic initiatives will result in continued improvement in operating results at all of our properties in the future."

These "continued improvements" apparently are reflected in the company’s higher guidance for the quarter.

As for the larger gaming companies, MGM MIRAGE Inc. (MGG) was down $0.42 to $32.80; Mandalay Resort Group (MBG), down $0.76 to $32, and Harrah’s Entertainment Inc. (HET) down $0.67 to $41.18.

Slots bonanza

The month of May developed into a financial bonanza for the state of Connecticut since the two Native American casinos reported a combined record for slots revenues during the period.

As a result, the state received $36.1 million from the Mashantucket Pequots, who own Foxwoods Resort casino and the Mohegans, who own the Mohegan Sun Casino.

Oddly enough, rainy weather "likely prompted more people" to visit the casinos during May, said industry observers. Mohegan Sun CEO and General Manager Bill Velardo said the May results were "a healthy sign that both Foxwoods and ourselves grew." He added that "we are looking forward to a fun summer."

Bill Sherlock, president and CEO of Foxwoods Resort Casino, said May was the second best month in the property’s 11-year history and the very best May ever. The casino won $74.6 million with its slot machines, a 7.5% increase over last year’s month of May.

At the Mohegan Sun, slot revenue totaled $70.1 million, a jump of 12.3% over last year’s figure.

Reducing their stakes

The two top executives of Mandalay Resort Group (MBG) were active in reducing their holdings in the company last week.

According to filings with the Securities and Exchange Commission, Mike Ensign, chairman and CEO of the company, and his associate, William Richardson, began selling their shares, estimated to be about 15% of their respective holdings, on Tuesday.

The selling continued into Thursday when it was determined that they had sold about 800,000 shares each. The shares, at the time, were selling for a price in excess of $33 a share.

By week’s end, Ensign’s and Richardson’s share holdings were slightly more than four million shares each.

Crowded field

Ted Arneault, CEO of MTR Gaming Group (MNTG) is continuing his assault on Pennsylvania racing licenses by announcing his intention to bid on the state’s sixth and final license for a $100 million thoroughbred racetrack and casino in the Pittsburgh area.

The company already has been approved for a license for a harness racetrack near Erie.

In announcing the company’s latest move, Arenault revealed that MTR Gaming has taken an option on 350 acres on the northeast side of Allegheny County. He said he was putting together a group of investors for the project with his company retaining a 30% interest and the operating rights.

So far, seven different groups had indicated an interest in the racing license. They were motivated by the state’s early interest in approving legislation that would permit the state’s racetracks to install video lottery machines. However, such legislation has bogged down and hopes for its passage has been dwindling.

Arneault said his group would go forward with the Pittsburgh-area track even if the state did not approve slot machines.

The Insider

Joe Greff, chief gaming analyst for Fulcrum Global Partners, on Monday cut his per-share profit outlook for Harrah’s Entertainment Inc. (HET) for 2003 to $2.85 from the previous $2.95 and for 2004 to $2.94 from $2.98.

Funds have been raised by the National Congress of American Indians for a National Indian Gaming Economic Impact Study that is expected to take some two years.

Louisiana Gov. Mike Foster has decided to permit the voters in New Orleans to decide whether Fair Grounds racetrack should be permitted to operate slot machines.

WMS Industries Inc. (WMS) will record a fourth quarter charge of $3.5 million or $0.07 a share because it has ended an agreement with StarGames Corp. to market the product Rapid Roulette.

The Passamaquoddy and Penobscot Indian Tribes have optioned a piece of real estate containing about 300 acres near the Sanford/Kennebunk (Maine) line as the possible site of a $650 million casino-resort.

Harrah’s Entertainment Inc. (HET) officials have agreed with Rhode Island to register their lobbyists and report their financial activities.

GTECH Holdings Corporation (GTK) has signed a two-year contract extension with AB Svenska Spel, the lottery operator in Sweden. Also, the company has been invited by Wisconsin Department of Revenue to negotiate a new five-year contract with its Lottery Division.

Colorado gaming regulators announced that gaming companies reported May revenue was $62 million, a 9% increase over the previous year.

Magna Entertainment Corp. (MECA) says it plans to sell an additional $50 million in notes with proceeds to be used for corporate purposes.