Tuesday, May 4, 2010

Casinos: Boyd Gaming Swings Back to $8.4 Million Q1 Profit, Still Wants Station's Casinos

So Boyd reported earnings this morning. They went from a $0.16 per share, or $13.8 million total, loss in Q1 2009 to a $0.10 per share, or $8.4 million total, profit. So how did they do it? Apparently they've been cutting costs rather aggressively, as net revenue actually fell 8.4 percent to $398.4 million from $434.8 million in Q1 2009.

Still, Boyd stated in its report that there's good reason to be more bullish on Las Vegas these days.

Keith Smith, President and Chief Executive Officer of Boyd Gaming, commented on the quarter: "We continue to be encouraged by improving trends in our business, which clearly reflect the signs of an emerging recovery. Our Las Vegas Locals market reported the best year-over-year comparison in nearly two years, and business levels are returning to normal seasonal patterns in this region. Given the positive developments in our business, combined with continued improvement in the national economy, we expect to generate year-over-year growth during the second half of 2010."

Looking at the internals, it seems like the locals' casinos are starting to recover their footing. Boyd's locals' casinos' Q1 2010 EBITDA was off only 10.8% from Q1 2009, compared to Boyd's Downtown casinos' EBITDA dropping 37.3%. No wonder why Boyd isn't pursuing any more Downtown casinos, but is still aggressively going after Station Casinos.

During Tuesday’s conference call, Smith said Boyd is still aggressively pursuing the acquisition of Station Casinos’ assets.

In December, Boyd made an offer to purchase Station Casinos’ assets in an effort to expand its locals market. The offer was $2.45 billion for the company’s 18 casinos and casino-hotels in Southern Nevada.

“We welcome the opportunity to compete for Station [Casinos] assets so long as the process is competitive, open and fair and as long as the assets have not been devalued to a point where it no longer makes financial sense,” Smith said.

So the picture is becoming clearer now. Boyd seems to have found the "magic formula" of expense cuts and travel/gaming promotion to return its locals' casinos to profitability (thereby taking the entire company back to black), so it thinks it can make money off Station's casinos. But wait, can they negotiate a deal with the Greenspuns on GVR and Aliante? And can they run these and the other "OpCo" properties without Station's Boarding Pass (players' club program) feeding locals and non-Strip travelers into the casinos? Apparently so, or so Boyd execs think.

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