Merrill Lynch upgrades Station to “buy”

Tuesday, April 25, 2000 | 10:34 a.m.

Merrill Lynch gaming analyst David Anders upgraded Station Casinos Inc. from "accumulate" to "buy," citing its "dominating" position in the Las Vegas locals casino market and healthy returns on investment.

Anders set a price target of $35 for Station, a 39 percent premium over its current market price.

"Station's four Las Vegas properties have experienced increasing returns over the past several years, generating a combined (cash flow) return of 27 percent in 1999," Anders wrote. "In comparison, the new properties on the Las Vegas Strip have generated average ... returns of roughly 11-17 percent."

Anders pointed optimistically to "numerous growth opportunities" for Station, including the expansion of Texas Station, as well as plans to build casinos in Green Valley and North Las Vegas.

Separately, Anders raised Argosy Gaming from "accumulate" to "buy," increasing his 2001 earnings estimate from $1.55 per share to $1.65 per share. Anders set a price target of $19, 26 percent above current levels.

In his report, Anders said Argosy's five riverboat casinos in the Midwest were "benefiting from an improved regulatory environment and increased demand." In particular, Anders said Argosy may soon have the opportunity to buy out the 42.5 percent interest it does not own in its Lawrenceburg, Ind., casino, located near Cincinnati -- a move that would be "significantly accretive to EPS."

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