Station Casinos Expect to Exceed Projections

Wall Street analysts jumped on the Las Vegas locals market bandwagon Thursday after Station Casinos announced third-quarter earnings exceeded earlier projections, thanks to the strength of the local economy.

In a Securities and Exchange Commission filing, Station said third-quarter revenue growth at its major Las Vegas operations should at least hit the top range of the 8 percent to 11 percent guidance previously provided by the company.

"Bottom line, the quarter is shaping up very nicely," Station Chief Financial Officer Glenn Christenson said.

There have been concerns about performance stemming from gasoline price increases and Hurricane Katrina, but Christenson said his company's business is still very strong because of the resilience of the Las Vegas locals market.

While the company did not raise guidance with a specific projection, Deutsche Bank analyst Marc Falcone said he now estimates Station's results will exceed the top end, given continued strength of Station's Jumbo Jackpot marketing program, the performance of the Las Vegas economy and the locals market demographics.

As a result of the filing, Bear Stearns analyst Joe Greff said: "Station, in our view, remains the best growth story with the most visibility among the gaming operators."

He said the supply-demand dynamics in the locals market plus a laddering of growth projects that goes through 2010 contribute to the upward revisions in estimates of Station's performance.

Station also released new estimates placing the value of its nonrevenue producing land as high as $1.3 billion.

"Our land holdings are a key component of our stock values. As we've accumulated more property over time, we felt a need to inform investors about the value placed on that property," Christenson said.

The initial acquisition cost of 489 acres in land-banked property in Nevada was placed at $188 million.

Station also owns 67 acres of land at Wild Wild West, which cost $149.6 million and 40 acres of excess land associated with its current hotel-casino operations.

In addition, Station has advanced approximately $149 million toward the development of future tribal gaming projects, which it believes will be repaid from either the financing or the operation of these projects.

CB Richard Ellis provided new estimates for the land in Nevada and Robert Charles Lesser & Co. provided estimates for the land in California.

Investors previously were left to depend on acquisition costs to evaluate the value of the company.

Analysts said the announcements bode well for Boyd Gaming Corp. as well.

"We believe that Boyd should also benefit from this continued Las Vegas locals growth, so we're currently projecting 9 percent (third-quarter) revenue growth for its Boulder Strip and Coast properties," Falcone said.

Wall Street previously had estimated Boyd Gaming's third-quarter revenue growth at 7 percent.

Station Casinos shares closed Thursday at $69.88, up 0.49 percent or 34 cents on 600,000 shares trading, slightly above normal trading volume.

Boyd Gaming closed at $48.08, down 0.23 percent or 11 cents on 637,000 shares trading, just below normal trading volume.