LVMS purchase a good deal, analyst says

Gary Thompson

Tuesday, Dec. 15, 1998 | 10 a.m.

Speedway Motorsports Inc.'s acquisition of Las Vegas Motor Speedway is a good deal for the North Carolina-based company, a leisure-industry analyst says.

"We're bullish on motor sports as an industry, and there are certain things that make companies such as TRK (its stock trading symbol) more desirable than others," says Bill Scovin of Ladenburg Thalmann & Co.

"You want a company that has the best tracks, licenses to promote the best races, the best locations and the ability to expand when demand for seats warrants it," he says.

Speedway Motorsports already operates the Charlotte, Texas, Bristol and Atlanta Motor speedways and Sears Point Raceway, all hotbeds of NASCAR racing.

Speedway staged 15 NASCAR races in 1997 and 1998, and hosted four Indy Racing League events, three NASCAR Craftsman Truck Series races and one National Hot Rod Association event this year.

Through subsidiaries, the company also operates food and beverage concessions and sells condominiums at some of its racetracks.

It agreed to buy LVMS, which features a 107,000-seat superspeedway on a 1,500-acre site and about 1.4 million square feet of warehouse space.

"This business isn't a real estate business in a classic sense of the word, but a hybrid business featuring location, brand equity and marketing," Scovin says.

Bruton Smith, Speedway Motorsports' chairman and controlling shareholder, "has been doing this for 50 years and he obviously knows what he's doing," Scovin says.

LVMS gives Smith "a very good -- though so far under-managed -- track in a very good and desirable market," he says. Good NASCAR markets are typically near major metropolitan areas -- Phoenix and Southern California qualify -- that "are within striking distance of 10 million to 20 million people," he says.

"To build a new track would cost at least $200 million and require a minimum of 1,000 acres. You'd have to go through a long, drawn-out political process to get the necessary approvals. And it wouldn't pay unless you got a Winston Cup race date, which this track already has.

"So if you can buy a good track that already exists in a good market at a reasonable price, it's the thing to do."

Another beneficial factor is the normally clement weather in Las Vegas. LVMS has NASCAR races scheduled in March and an IRL event in September of next year.

Scovin sees little downside to the possibility that new advertising restrictions on tobacco companies may force the sport to seek other financial support.

"Motor sports is a growth industry that has been discovered by a lot of other packaged-goods advertisers," he says. "If tobacco spending gets cut back, others will pick up the slack."

He also sees potential expansion abroad for NASCAR racing, despite a dearth of oval tracks in other countries.

Scovin is one of five racing investment analysts with a buy rating on the stock.

Speedway Motorsports had net income of $43.5 million on revenue of $223.6 million in the past 12 months. The stock, which has traded between $14.75 and $30.065 over the past year, closed Monday at $25.875, down $1.625.

The company has about 41.5 million shares outstanding and a market capitalization of about $1.07 billion.