Fertittas strike it rich(er); Boyd surprises analysts

Red Rock Resortsaka Station Casinos — split the difference in Wall Street‘s expectations of this week’s IPO, debuting a $19.50 (Street estimates ranged from $18 to $21 a share). Unfortunately, unlike the MGM Growth Partners offering, the goal of this red_rockIPO is rather more base than enlarging the company. The already wealthy Fertitta Brothers stand to make out like bandits. As the Las Vegas Sun summarized the offering, “CEO Frank Fertitta III and his brother Lorenzo, a director of the company, will each receive $113.5 million of those proceeds after debt is paid off, the filings said. Trusts for their six children will receive a total of $106.8 million.” So there will be lots of rich little Fertittae running around but the company will remain in the torpor that has afflicted it since going private. $531 million might build a handsome new casino in Reno and Las Vegas, the two jurisdictions where Station has land but won’t develop. It’s anybody’s guess whether Frank Fertitta III is simply being shortsighted or has become bored with the casino industry. In any event, whenever you get your hopes up that Station will return to its glory days, it disappoints you again.

* While Station rests on its laurels, Boyd Gaming has been busy snapping up locals casinos left and right. It also beat JP Morgan analyst Joseph Greff‘s projections for 1Q16, thanks to “ongoing strength” both at Borgata and on the Las Vegas locals front, “stable economics for the regional gaming customer,” and despite some flood-related setbacks in the Midwest. Also, revenues at IP Biloxi dipped, thanks to new competition from Scarlet Pearl Casino. After hearing Boyd’s cash-flow projections, Greff wrote that aliante“we cannot help but think this may be conservative given the relatively strong 1Q performance and encouraging regional gaming trends, particularly in the Las Vegas Locals market.” He also expects the Cannery Casino Resorts and Aliante Casino acquisitions to enlarge the locals sector from 26% of Boyd’s business to 33%.

There wasn’t much more to report on the Aliante/Cannery front other than the disclosure that the former was due for $3 million in capex maintenance and another $3 million to $5 million would be spent bringing the Canneries up to date. Since it’s paying for the three casinos out of cash on hand, Boyd expects to be back to its former level of leverage in nine months, news that would come as music to Wall Street’s ears. Las Vegas revenues were up 5%, driven by a combination of factors that included 14% higher room rates and cheaper fuel costs for charter flights from Hawaii, whose Boyd-directed business is picking up. (No surprise there.) Outside of Las Vegas, Boyd has $227 million budgeted for expansions and upgrades. Wrote Deutsche Bank analyst Carlo Santarelli, “We found results to again be indicative of a [management] team focused on costs and we continue to believe regional gaming, broadly, has an accelerating growth trajectory cadence to it.”

* John L. Smith‘s resignation from Sheldon Adelson‘s Las Vegas Review-Journal continues to make headlines … just not in the R-J, which continues to plump Adelson’s Sheldon Apush for a taxpayer-funded NFL stadium. (Considering that season ticket sales in Oakland have shot up 65%, one expects the Davis clan to leave Las Vegas at the altar.) The Las Vegas Sun not only ran the most shoddy-looking photo of R-J headquarters, it also reveled in unflattering depictions of its crosstown rival. Feckless R-J Editor Keith Moyer told the Society of Professional Journalists that Smith wouldn’t be allowed to write about Adelson “as long as I’m editor,” probably ensuring his job security but abolishing his credibility. (The SPJ should have expelled Moyer on the spot.) Moyer has effectively painted a target on the back of every R-J reporter. If you don’t like what they’re writing, threaten a lawsuit and the unfortunate scribe gets muzzled. The R-J (under different editorship at the time of its purchase) made a lot of bold noises about maintaining its independence from the Adelsons, words that Moyer has essentially and ineffectually eaten. Now, when Sheldon’s viewpoints clash with the R-J‘s, you can expect the paper to fold like a cheap suit.

* An entertaining story in Popular Mechanics tries to unravel the mystery of who was the iconic “Miss Atomic Bomb” — and recalls how Las Vegas tried (successfully) to turn nuclear testing into a tourist draw.

* Word on the Strip is that paid parking at Bellagio (and probably at all other MGM Resorts International Strip properties except Circus Circus) begins on May 31. It’s the end of an era.

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