Wynn issues detailed numbers on properties as Mirage stock falls

David Strow

Friday, Feb. 11, 2000 | 11:08 a.m.

Mirage Resorts Inc. relented to analyst demands Thursday, releasing quarterly financial results for all of its hotel-casinos for the last two years.

The move is significant because it appears to be aimed at reversing a slide in the price of Mirage stock.

The numbers paint a picture of success at the Bellagio resort and an improving performance at the Treasure Island hotel-casino. But these success stories were countered by a sharp drop in business at Mirage's namesake resort, and continuing struggles at Beau Rivage, Mirage's $700 million resort casino in Biloxi, Miss.

Analysts praised Mirage and Chief Executive Steve Wynn for releasing the numbers.

"Their relations with Wall Street have been terrible," said Steve Ehlers, chief financial officer for Las Vegas Investment Advisors. "This will greatly enhance the relations that Mirage will have with Wall Street analysts. No question."

Mirage stock fell 50 cents to $11.56 on Thursday, the day the numbers were released. Mirage fell an additional 13 cents in morning trading today, putting it in danger of closing below its 52-week low of $11.50.

Joe Coccimiglio, gaming analyst with Prudential Securities, doesn't believe that's a market indictment of Mirage alone. While Mirage has fallen nearly 25 percent in 2000, the five largest stocks in the gaming industry have fallen 20 percent. And the worst hit is Mandalay Resort Group, which has seen its stock decline nearly 30 percent.

"(Mirage's fall) is not really all that much different from the rest of the group," Coccimiglio said. "The millennium was hoped to be an earnings contributor, and it was actually a negative. The fourth quarter was disappointing, at least versus expectations. That's what we're suffering from at this point."

The starkest number in Mirage's report was Beau Rivage -- a property analysts had expected to produce upwards of $80 million a year in cash flow. Over the nine and a half months Beau Rivage was open, it produced $45.1 million in cash flow. It averaged slightly more than $15 million in quarterly cash flow over the last three quarters of 1999.

"The company's saying they expect those results to improve over a one- to two-year period," Coccimiglio said.

Reaching $80 million would allow the company to break even on Beau Rivage, and Mirage is expected to reach between $70 million and $80 million at the resort in 2000, Coccimiglio said.

Meanwhile, Mirage's other new property, the Bellagio, burst out of the gates with a strong 1999 performance.

In the fourth quarter of 1998 -- its first on the market -- the Bellagio emerged with revenues of $244 million and operating income of $34 million. By the fourth quarter of 1999, revenues were up 23 percent, reaching $300.7 million. Operating income rose 88.5 percent, to $64.2 million.

In 1999, the $1.6 billion Bellagio recorded revenues of $1.1 billion and operating income of $168.6 million.

"The Bellagio would have been that much stronger in 1999 (without weakness in the Asia market)," Coccimiglio said. "They also benefitted from the newness halo."

But as the Bellagio rose, the Mirage hotel-casino quickly fell as many of its customers went to Bellagio. In the fourth quarter of 1998 -- Bellagio's first on the market -- the Mirage's revenues fell 20 percent, to $161 million. Operating income fell 35.5 percent to $26 million.

The Mirage has yet to recover. In 1999, its revenues were down 6 percent from 1998, and its income was down nearly 40 percent.

"Some of that is cannibalization from the Bellagio, some is Asia weakness," Coccimiglio said. "The third is just decisions made in boardrooms outside of Mirage.

"There's all that new capacity in Las Vegas, all aimed right at Mirage ... particularly Mandalay Bay."

Though the Mirage is down from its historical numbers, Ehlers believes it will start to recover this year, particularly as the Asian economies get back on their feet.

"It's slipped a little bit, but it's still a damn good hotel," Ehlers said. "That's not the problem with Mirage (Resorts)."

One number that caught analysts by surprise was the strong performance posted by Treasure Island, particularly in the fourth quarter of 1999. Though revenues fell 3.6 percent at the resort, and cash flow fell 2.6 percent, Treasure Island's operating income increased 2.1 percent for the year, to $65.9 million.

In the fourth quarter, Treasure Island's operating income was $18.9 million. That's more than $3 million more than Mirage, and more than double the operating income produced by Beau Rivage.

"That is incredible," Ehlers said. "Management's obviously doing a very good job at Treasure Island."

"(Treasure Island) had their rooms renovated throughout 1999, and they got a nice bounce in the fourth quarter," Coccimiglio said. "I'm surprised Wall Street isn't happier with that result.

"What (Mirage Resorts) needs to show in the first quarter is continued progress."