Lehman Bros. resumes industry coverage, urges caution in investing
Tuesday, Dec. 19, 2000 | 11:15 a.m.
Wall Street firm Lehman Bros. today resumed coverage of the gaming industry -- and promptly advised investors that gaming stocks may be a risky bet in 2001.
In her initial report, analyst Joyce Minor said the slowing of Las Vegas' growth, lack of new supply and a slowing national economy "will mean Las Vegas is less exciting." New supply growth could fall as low as 2.3 percent in 2002, Minor wrote.
"We believe that Las Vegas is more likely to be impacted by a softer economic climate than regional, drive-to gaming markets," Minor wrote. "Just as positive momentum has worked to the group's benefit in the last two years, less robust Las Vegas trends could spur negative investor psyche and adversely affect the big cap group in 2001."
Minor issued "buy" ratings on Park Place Entertainment Corp. and Harrah's Entertainment Inc., saying their geographic diversification outside of Las Vegas made them attractive gaming investments. Minor estimated Park Place earnings per share should increase by 14 percent in 2001, driven by growth from the Caesars World and Grand Casinos portfolios, a $200 million decline in debt, and a $530 million drop in capital expenditures.
Despite Harrah's tax negotiations over its New Orleans casino, disappointing results from the Rio and the recent bankruptcy filing by National Airlines, Minor wrote that "Harrah's business strategy and positioning going into 2001 is sound and we are positive on Harrah's as we expect that the issues that have plagued them in 2000 will either disappear or improve in 2001."
Minor issued "neutral" ratings on MGM MIRAGE and Mandalay Resort Group. While calling MGM MIRAGE "the gold standard" of gaming, she noted that its heavy exposure to the Las Vegas market kept her from recommending the stock.
"A continued narrowing of this premium (of MGM MIRAGE stock the rest of the gaming industry) would cause us to re-examine our rating, as we are long-term bulls on these assets and the abilities of this management team," Minor wrote.
In the case of Mandalay, Minor expressed concerns both about the company's Las Vegas exposure and its "disappointments" in issuing a neutral rating. Noting the company's repurchase of 17 percent of its stock this year, Minor said there is speculation Mandalay might attempt to go private in the long term.
"Mandalay has been very inconsistent with regard to earnings due to its high fixed coast basis and earnings disappointments are common," Minor wrote. "We believe Mandalay shares are fairly valued."
Minor also issued an "outperform" rating on Station Casinos Inc., calling it "without question the Las Vegas locals leader." While noting that its market position made it unlikely to be affected by a slowdown in the Las Vegas visitors market, Minor said that the integration of Santa Fe, Fiesta and the Reserve into Station's portfolio "would require ... patience in 2001."
"We believe 2001 will be a transition year and the upside will not be evident until 2002, when little new supply is expected to enter the locals market," Minor wrote.
Minor also initiated coverage on:
archive
- Most Read
- Discussed
- Most E-mailed
- Google Maps glitch renames Henderson
- Fight snapshot: Pacquiao is a hit with Jimmy Kimmel, and vice versa
- Vegas is inspiring, but not buying, ideas for tourism ads
- Rebels’ win raises a few what-ifs
- Wood: Not the renewable energy some had in mind
- Pinnacle CEO resigns after meeting confrontation
- Quagga mussels a toxic threat to Lake Mead
- As earnings fall, Riviera unsure if bankruptcy can be avoided
- Trial set for parents of boy, 4, who died in hot vehicle
- Not all doctors agree with AMA support of bill
Blogs
Robin Leach's Las Vegas Celebrity Watch
Who are the Final Four on Dancing With the Stars?
Politics: Ralston's Flash
Drugs bring Nevada governor, first lady back together (3 Comments)
Elsewhere
Macau's gambling industry faces nightmare of water rationing (2 Comments)
Top Chef: Las Vegas
Top Chef Odds Week 11: And then there were six
Politics: The Early Line
Rep. Berkley livens health care debate with story of her own (1 Comment)
Now and Then
Wranglers to face familiar foe and that's putting it mildly
Robin Leach's Las Vegas Celebrity Watch
Photo Gallery: Donny Osmond’s DWTS dream is in danger
Calendar »
- 10 Tue
- 11 Wed
- 12 Thu
- 13 Fri
- 14 Sat
-
Las Vegas Wranglers vs. Utah Grizzlies
Orleans Hotel-Casino
-
Leaving Springfield at Beauty Bar
Beauty Bar | 10 p.m. to 11:59 p.m.
-
Justin Sayne and Dignity at Moon
Moon Nightclub | 10:30 p.m. to 11:59 p.m.
-
Lily Tomlin at the Hollywood Theatre
Hollywood Theatre at MGM Grand
-
2nd Annual Go-Go Cup at Blush
Blush Boutique Nightclub | 10 p.m. to 11:59 p.m.
The Sun
Locally owned and independent for more than 50 years.
Technorati











