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Mandalay has blowout quarter

Jun 8, 2004 4:15 AM

Wall Street expected a strong earnings report from Mandalay Resort Group (MBG) last week but when the numbers were revealed there was an immediate reaction among investors.

Shares of MBG rose nearly 11% or about $6 per share in the first full day of trading on Friday. All this took place before the announcement that MGM MIRAGE Inc. (MGG) was making a bid to acquire the company.

What had one gaming analyst exclaiming, "Wow," was the company’s announcement that net income for the three months that ended on April 30 reached $87.3 million or $1.30 per diluted share, nearly doubling the comparable numbers of 2003 that were $44 million in net income and $.069 earnings per share.

That difference was reflected in the rising share price with MBG closing on Friday at $55.60, or nearly twice as much as the $30 that it was quoted at 52-weeks ago.

In his explanation of the company’s performance during the quarter, Glenn Schaeffer, company president and CFO, pointed to the benefit derived from the opening last December of THEhotel, a property with 1,117 suites next to the Mandalay Bay facility, and a 16% increase in revenue per available room (REVPAR), that saw the average rise to $210. Mandalay Bay’s occupancy rate was 89% while the new property reached 86%.

Strong REVPAR was also noted at the company’s other Las Vegas Strip properties. Luxor was up 24% with an average room rate topping $120 its highest quarter ever. Excalibur was up 23% while the REVPAR at Circus Circus increased 18%. At the Monte Carlo, half-owned by MGM MIRAGE Inc. (MGG), room rates increased 24%.

Also turning in a strong performance was MotorCity, the company’s majority owned casino in Detroit, Mich. Cash flow was $41.4 million, or 26% higher than in the April quarter of 2003. The property benefited from a strike that closed Casino Windsor across the Detroit River in Ontario.

Negatively impacted by the increased taxes in Illinois was the company’s 50% owned Grand Victoria casino. The operating cash flow declined from last year’s $23.8 million to the current $14 million. The company said the 70% tax on gaming revenues impacted Mandalay’s earnings by approximately $0.06 per diluted share in the quarter.