Competition, other woes hurt Mirage earnings

Adam Steinhauer

Friday, July 2, 1999 | 11:41 a.m.

MIRAGE STOCK

Several gaming securities analysts downgraded Mirage stock today after being surprised by the sharp cut in projected second-quarter net.

For example, Jason Ader of Bear Stearns & Co. said Mirage "now has a credibility problem which is going to take time to resolve and work through."

"We also do not see any near term catalysts for the stock, and given the risk of slower than expected ramp-up in Biloxi, increased competition in Las Vegas, and new concerns related to new developments in both Atlantic City and Las Vegas, we believe that Mirage should trade at a discount to other leading Las Vegas Strip operators," Ader said.

In early afternoon trading today, Mirage stock was at $15.125, off $1.625, on volume of more than 9.1 million shares after trading off more than $3 a share earlier.

Mirage Resorts Inc. said it expects to earn 7 cents to 10 cents a share in the second quarter, far less than analysts estimated, because of higher costs, competition and meager winnings at its gambling tables.

The Las Vegas company has been expected to earn 24 cents a share, according to the average estimate of analysts polled by First Call Corp. Estimates from 20 analysts ranged from 20 cents to 28 cents.

Mirage said it won less than usual at table games in its casinos, faced competition from new casinos on the Las Vegas Strip and suffered disruptions at its Treasure Island casino resort in Las Vegas as its hotel rooms were renovated. Also, its new Beau Rivage casino in Mississippi got off to a slow start and has been expensive to operate.

"It has been our practice to open our hotels with extra payroll and other expenses to ensure a favorable guest experience in the new property," Mirage Chairman Steve Wynn said in a statement. "This focus on establishing the long-term positioning of our hotels was clearly a factor in the recent quarter."

The profit will be less than the 18 cents a share Mirage earned in the year-ago quarter.

The Beau Rivage, in Biloxi, Miss., opened March 16. An average of 76 percent of its rooms were occupied in April, rising to 81 percent in May and 94 percent in June, the company said.

In Las Vegas, Mirage said it lost business to the Mandalay Resort Group's new Mandalay Bay casino that opened March 2 and closely held Las Vegas Sands Inc.'s Venetian, which has been opening in stages since May. The Venetian is across the street from Mirage Resorts' Mirage and Treasure Island casinos. Mirage also owns Bellagio and the Golden Nugget and 50 percent of the Monte Carlo in Las Vegas.

Also, Mirage had 9 percent fewer available nights in rooms at Treasure Island than it had in the year-ago quarter, as Treasure Island underwent a $60 million renovation.

Across all of Mirage's casinos, the company said it won about 16.7 percent of the money wagered at its tables. A normal "hold percentage" for the quarter would have been about 20 percent, Mirage said. The small winnings reduced Mirage's earnings by about 6 cents a share, it said.

Revenue rose about 82 percent in the quarter, Mirage said, with the opening of Beau Rivage and Bellagio's opening in October. Mirage said it believes Bellagio is the highest-grossing casino in Las Vegas and Beau Rivage is the top grossing casino on the Gulf Coast of Mississippi.

Cash flow, or earnings before interest, taxes, depreciation and amortization, rose about 51 percent to $113 million.

The company issued its statement about its second-quarter earnings after the close of U.S. trading.