Boyd gets Wall Street love; Louisiana expansion slows

Boyd Gaming doesn’t make Wall Street‘s hit parade very often, so this morning’s dispatch from Deutsche Bank‘s Carlo Santarelli the more remarkable. “The improving regional [gross gaming revenue] climate and intense cost disciplines take our forecasts, and subsequently, our Price Target higher,” he wrote. Second-quarter cash flow comfortably exceeded expectations and Boyd raised projections for full-year cash flow by $32 million.

J.P. Morgan analyst Joseph Greff was also impressed with Boyd’s numbers, both in terms of gaming revenue and cash flow, but continues to prefer Penn National Gaming among regional operators “given its robust development pipeline, solid free cash flow generation and balance sheet strength.” Still, Greff noted that “nine [Boyd] properties were up double-digits” and cash flow in the Las Vegas segment exceeded projections 10% — and 44% in Downtown. Hawaiian business is up and charter-air fuel costs are down, contributing to the rebound. In addition to a combined $160 million of maintenance, restaurant upgrades and room renovations, Boyd is embarking on the first phase of a Delta Downs expansion that will ultimately cost $45 million.

Boyd management evinced only “limited interest” in converting to a
REIT structure. Instead, its priorities were more attention-grabbing, including potential expansion in the Las Vegas locals market, which Santarelli characterizes as “improving, though still possessing a tremendous runway.” More arresting still, “management expressed a willingness to acquire the MGM [Resorts International] share of Borgata.” Having tried so hard to get back into Atlantic City, would MGM abandon its foothold so blithely? And how important is roughly $25 million a month in gross gaming revenue to the lion’s bottom line? Still, with MGM CEO Jim Murren selling non-core assets left and right, I wouldn’t assume the Borgata is safe from the auction block.

* Louisiana‘s gaming-revenue expansion, driven by the Golden Nugget, is reaching the outer limits of its elasticity. The Pelican State was up 2% last month, but 8% when the Nugget is discounted. Divided by operator, the results ranged from the pleasantly surprising (Isle of Capri Casinos, up 5%) to terrible (Caesars Entertainment, down 24%). The second-highest grossing casino in the state, Golden Nugget ($21.5 million) drew business off of Pinnacle Entertainment‘s L’Auberge du Lac ($28 million, -14.5%) and Delta Downs ($14.5 million, -8%).

In the crowded Shreveport/Bossier City market, everyone except Margaritaville ($12 million, +23%) experienced declines, even usually reliable Eldorado Shreveport ($11 million, -4%). Caesars lost market share at Horseshoe Bossier City ($16 million, -12%), Louisiana Downs ($3 million, -24%) and Harrah’s New Orleans ($21$ million, -31%). Pinnacle experienced adversity at Boomtown Bossier City ($4 million, -12%) but compensated for it with gains at L’Auberge Baton Rouge ($12 million, +4.5%, above) and Boomtown New Orleans ($9 million, +4%). Likewise, a good month aboard Treasure Chest ($8.5 million, +7%) ameliorated a variety of modest declines at other Boyd-owned casinos.

* Shame on Caesars Entertainment for introducing a cover charge for hotel guests wanting to use its GO Pool. Caesars may be squeezing a nickel until it drips blood these days but let’s hope this isn’t the leading edge of a wider Strip trend.