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Gaming stocks soar on positive
comments by Mandalay Resorts

Apr 6, 2004 3:39 AM

Pricing power raised its elegant head on Monday with an advisory from Mandalay Resort Group (MBG) that strong room occupancy during the current quarter permitted the company to advise that earnings per share are expected to exceed $1.10. This was substantially higher than last year’s $0.69 per share and higher also than average analysts forecast of $0.95 per share.

Strong visitation at the company’s premier properties was responsible for the profitable quarter, according to Glen Schaeffer, president and chief financial officer.

"Our company has continued to achieve strong momentum in revenue per available room on the Las Vegas Strip, at a double-digit clip similar to recent quarters," Schaeffer remarked in announcing the earnings advisory.

"The biggest gainers are Mandalay Bay and Luxor, where THEhotel and Mandalay Place, the shopping experience and pedestrian bridge connecting those properties, have added considerable traffic," he said.

He explained further that THEhotel, which opened in December, has turned in an average room rate of $240 in the first two months of the quarter while maintaining an occupancy rate above the 80% level.

Also, he said, slot machine revenues at Mandalay Bay grew by almost 30% in the first two months of the current quarter. He expects Mandalay Bay, Luxor and Excalibur (all connected on the south end of the Las Vegas Strip) to report record results for the quarter that ends on April 30.

The company will release its results for the period on June 3.

Monday’s announcement was enough to trigger strong support among investors on Wall Street. In early trading, a share of MBG cost $60.57, an increase of $2.36 over Friday’s closing price. After more than 3.4 million shares had traded on Monday, the individual price closed at $61.23, up $3.02 for the day.

Mandalay Resort Group’s solid quarter report was enough to boost the price of other gaming shares as well. MGM MIRAGE Inc. (MGG) closed at $48.57, up $1.80; Harrah’s Entertainment Inc. (HET) $57.42, up $1.42, and Caesars Entertainment Inc. (CZR) $14.08, up $0.49.

And both MBG and MGG could benefit from a labor problem that has closed Casino Windsor, a casino located across the Detroit River from the two Detroit casinos operated by the American companies.

Higher bid

The ball was returned by Wembley Plc to the court of MGM MIRAGE INC. (MGG) last week when a consortium topped its bid for the British dog track operator. In fact, Wembley advised shareholders that the MGM MIRAGE bid would not be considered at the company’s annual meeting on April 9.

MGM MIRAGE had bid 270 English pounds to acquire the company whose principal earnings last year were derived from the troubled Lincoln Greyhound Park in Lincoln, R.I. The company also has a half-dozen dog tracks in England and four in Colorado.

But, moving in as a competitor for the company was BLB Investors, a consortium consisting of Starwood Capital, a subsidiary of Starwood Hotels and Resorts Worldwide (HOT), Kerzner International (KZL), and the leisure firm Waterford Group.

BLB Investors immediately corralled nearly 25% of Wembley’s stock by buying it from an investor firm and then topped MGM MIRAGE’S bid by offering 287 pounds or approximately $527 million for the company.

Before making its bid, some of the BLB Investors principals, privately met with Rhode Island Gov. Ralph Carcieri to perform some "due diligence."

When the BLB Investors’ bid was announced, a representative of Citigroup, the financial firm that had been representing MGM MIRAGE in the proceedings, said that the American company would review its position to see if it wanted to increase its bid. The comment brought a rebuke from an English oversight committee that such a comment violated the country’s takeover bid regulations.

More machines

Acting on the request of Penn National Gaming Inc., (PENN) the West Virginia Lottery has approved a company request to increase the number of video lottery machines it operates at Charles Town Racetrack to 4,500 from the current 3,500 machines.

The company said it plans to add the first 300 machines to its casino floor in the beginning of the fourth fiscal quarter with the other machines to be added according to demand and prevailing market conditions.

Peter Carlino, who as CEO of Penn National Gaming Inc. has been guiding the company in its evolution from a small racetrack operator to a major force in the gaming industry, said he was pleased with the Lottery’s approval of the request.

"Through ongoing investment in the facility and its amenities as well as the race track, we have developed Charles Town into a premiere regional entertainment center. We have also established strong relationships with the Lottery Commission and state and local government officials who have worked with us to create economic benefits to the region."

Conference Calls

Several of the major gaming companies, both casino operators and manufacturers have scheduled conference calls at which they plan to report on the fiscal quarter that ended on March 31. Among the companies with calls scheduled are:

Harrah’s Entertainment Inc. (HET) on Wednesday, April 21, at 6 a.m. PDT.

Alliance Gaming Corp. (AGI) on Wednesday, April 21, at 7 a.m. PDT.

MGM MIRAGE Inc. (MGG) on Wednesday, April 21, at 8 a.m. PDT.

International Game Technology Inc. (IGT) on Thursday, April 22, at 6 a.m. PDT.

Caesars Entertainment Corp. (CZR) on Thursday, April 22, at 8 a.m. PDT.

Ameristar Casinos Inc. (ASCA) on Wednesday, April 28, at 6 a.m. PDT.

Lottery deals

GTECH Holdings Corporation (GTK) says its subsidiary is the apparent successful bidder to provide the Washington Lottery with lottery product vending machines. The contract is for three years with provisions for three one-year extensions.

Should the continuing negotiations prove successful, the company said it plans to deliver about 1,000 automated lottery ticket distributors to the commission.

In another action, the Washington Lottery granted Scientific Games Corporation (SGMS) two one-year contract extensions worth about $5 million over its two-year term.

The contracts extensions involved a four-year contract for the delivery of instant tickets.

Also, on Monday, the company said it was paying $40 million to acquire Leeward Islands Lottery Holding Company Inc., the lottery used by the Caribbean Islands of Antigua and St. Croix.

System approval

The New Jersey Casino Control Commission has notified WMS Industries Inc. (WMS) that it has approved the company’s new operating system and its Bluebird gaming cabinet.

The approval permits WMS to immediately begin installing games in all New Jersey casinos.

New Jersey’s action comes on the heels of the company’s notice that it had installed its new system for field trials in casinos in Mississippi and in Nevada. Also, it soon would begin field trials in Ontario, Canada.

A company spokesman said WMS’s mechanical reel spinning products are expected to be approved in June, as are the company’s first poker games.

THE INSIDER: Whether it was the work of "Lose Slot Louie" or just plain luck but a player at the Ballys’ New Orleans riverboat in Louisiana won a $120,000 slot machine jackpot last week. The casino announced that it had loosened its slot machines by almost 30% in order to generate more interest in its gaming.

Standard & Poor’s Ratings Services has revised its outlook on the debt of Mikohn Gaming Corp. (MIKN) from stable to negative.

Caesars Entertainment Inc. (CZR) has contributed $60,000 for a tutoring program sponsored by 100 Black Men of Las Vegas. The program, known as the Wimberly Initiative for Special Education Action, offers special tutoring and mentoring for minority youngsters.

Boyd Gaming Corp. (BYD) says it had sold $350 million of 10-year senior subordinated notes in a private placement.

Auditors have indicated that Trump Hotels and Casinos (DJT) may go bankrupt if the company does not receive an infusion of cash from a proposed deal involving Credit Suisse First Boston.

Ameristar Casinos Inc. (ASCA) has announced that it will pay a quarterly cash dividend of $0.125 per share on April 30 to shareholders of record on April 14.

Century Casinos Inc. (CNTY) says it has re-opened the casino it operates aboard the cruise ship Insignia, a member of the fleet of Oceania Cruises in Miami, Fla.

Paul-Son Gaming corp. (PSON) reported net income of $1.3 million or $0.l8 per share for the fourth quarter of its fiscal year. This compared to last year’s net loss of $1 million or $0.14 per share.