Bad luck at tables hurts Mandalay

Gary Thompson

Wednesday, Aug. 25, 1999 | 11:05 a.m.

Mandalay Resort Group of Las Vegas reported second-quarter net income of $23.6 million, or 26 cents a share, compared with $25.3 million, or 27 cents a share, in the fiscal 1999 second quarter.

Revenue for the three months ended July 31 rose to $516.2 million from $384.7 million, the company formerly known as Circus Circus Enterprises said.

Net income for the latest quarter included $4.3 million of write-offs related to the company's joint-venture casino in Detroit, which is scheduled to open this fall, and to its Las Vegas timeshare project.

Per-share net was positively affected by the company's stock buybacks, which saw the number of shares outstanding drop to 92.4 million in the fiscal 2000 second quarter from 95.1 million in the year-ago period.

Yet the net per-share results were about 4 cents below analysts' projections, due largely to a lower-than-expected hold percentage on table games at the company's new Strip resort, Mandalay Bay.

Jason Ader of Bear Stearns & Co. said he estimated Mandalay Bay held only about 13 percent to 14 percent of the drop in its table games, "which is substantially below the company's normal hold."

"Assuming a more normalized hold percentage, we believe the company's quarterly results would easily have surpassed projections" of 30 cents a share, he said.

"We also believe it has continued to do an excellent job in individually marketing its properties," he said, noting there was no evidence of cannibalization of business from Luxor or Excalibur by Mandalay Bay.

Luxor's cash flow, in fact, apparently would have surpassed Mandalay Bay's even if the newer resort had posted a normal hold percentage, another analyst said. Assuming a normal win, Mandalay would have recorded cash flow of about $25 million instead of the $19 million it reported. Meanwhile, Luxor's rose to $26.8 million in the latest quarter from $24.3 million in the year-ago period.

The company said strong visitor counts to Las Vegas helped each of its properties post higher cash flows. Excalibur's cash flow was up to $20 million from $18.7 million and Circus Circus-Las Vegas cash flow rose to $18.3 million from $16.6 million, the company said.

At Monte Carlo, Mandalay Resort Group's joint venture with Mirage Resorts, operating cash flow rose to $20.4 million from $18.6 million in the year-ago quarter.

In Reno the company generated $17.1 million in operating cash flow, up from $14.8 million, and its two Laughlin properties posted a $200,000 cash-flow gain to $7.6 million.

The Gold Strike in Tunica, Miss., posted a record $9.6 million in operating cash flow, up from $7.9 million, and the Grand Victoria joint venture in Elgin, Ill., saw cash flow rise to $23.2 million from $19.4 million.

Mandalay Resort Group said the record $280 million of cash flow produced in fiscal 2000's first half will be bolstered by the new Detroit casino, perhaps as early as the current quarter.

Mandalay Resort Group President Glenn Schaeffer said on a conference call that the new Mandalay Bay resort recorded an 86 percent occupancy rate and an average daily rate of $114 for the latest quarter.

He said the company expects those numbers to rise as the use of Mandalay Bay's arena and convention space increases.