Boyd Gaming pleased Wall Street with its 3Q14 results, of which Joseph Greff of J.P. Morgan said “margin improvement was notable and impressive.” He noted 
modest growth in the Las Vegas locals and downtown segments and better-than-expected regional numbers, as well as at Borgata. He wrote “the recent reduction of capacity (and the potential for more) could be a positive for the Borgata, but any political momentum behind commercial casinos in northern [New Jersey] would be a sizable negative.” As for regional markets, “the degree to which year-over-year declines may indicate some stabilization (can be characterized as getting less bad)”
In Las Vegas, “strong pedestrian traffic in the Fremont Street area and growth in visitation from Hawaii” drove a slight increase in revenue but 6.5% higher cash flow. “The results were sound, and then [Boyd] dropped its version of the regional gaming short thesis poison,” wrote Deutsche Bank‘s Carlo Santarelli, “and noted on the call that they were actively 
exploring a REIT structure, having spent $3 mm this year working through logistics with its advisors … We believe, and management acknowledged, there are multiple impediments to the transaction … Our work, included in this note, suggests [Boyd], under optimal REIT math assumptions, can be worth as much as $17. That said, we’re not upgrading the stock here, given our view that ultimately, what looks good on paper, often doesn’t translate in reality” Still, Santarelli gave Boyd a nod for “fundamental improvements.” These presumably include the payment of $70 million on a $3.5 billion debt load.
Boyd posted a loss of $15 million, a considerable improvement on a year ago. The company credited nongaming upgrades for the higher returns in Las Vegas. Borgata
was up 5% and CEO Keith Smith “told the analysts that Borgata began to see positive trends even before four of its competitors closed.”
Smith cautioned analysts against an attack of REITmania, saying, “There are various aspects of our capital structure that make potential value creation through a real estate investment trust challenging at this time.” However, Boyd is under pressure from at 
least one of its institutional investors to make a REIT conversion. Given the stringent requirements of REITs to pass taxable earnings on to investors, this talk gives one apprehension about the future of Boyd’s properties.
* Also narrowing losses, although not as dramatically as Boyd, was MGM Resorts International. Analysts were expecting six cents a share in profit, so their disappointment was palpable, even though overall revenues were higher than expected. “We continue to invest in our properties and our people going forward, that caused some incremental expenses and some revenue and cost in terms of disruption,” said CFO Dan D’Arrigo, by way of explanation. The tortoise-powered pace of getting construction permits in Macao has delayed the opening of MGM Cotai to autumn of 2016, so that has to be a disappointment.
Stronger convention business is expected next year, a component that CEO Jim Murren called “critical.” Fitch Ratings analyst Alex Bumazhny said, “That’s the story they’ve been largely pushing and selling to Wall Street.” Murren also took a welcoming view of potential North Strip rivals like SLS Las Vegas and Resorts World Las Vegas, saying of the latter, “We’re rooting them on.” After all, Genting Group‘s intended Asian player base may find Eastern-themed Resorts World LV rather deja vu and check out more traditional-Vegas properties such as MGM’s instead.
* Congratulations to Reno‘s Peppermill Resort Spa Casino, winner of the 2014 Lodging Sustainability Award from Lodging Magazine and EcoGreen Energy Solutions. An on-site geothermal well provides all the heating for the property, resulting in the reduction of carbon dioxide emissions by 12,000 metric tons a year. The Peppermill was also hailed for its installation of Tesla charging stations, a closed-loop hydronic heating and cooling system that chills water using outdoor-air temperatures, the retrofitting of the interior-lighting system with LEDs and compact fluorescents, a paper-free HR department, and the conversion of table scraps into compost. S&G commends the Peppermill on being so forward thinking.
