Coverage set at ‘strong buy’

Wednesday, March 6, 2002 | 11:10 a.m.

Hibernia Southcoast Capital initiated coverage of Boyd Gaming Corp. with a "strong buy" rating, setting a target price of $16 for the Las Vegas casino company's stock.

The target price is a 39 percent premium over current trading levels.

In a research note, Hibernia analyst Daniel Davila cited three factors for the strong buy rating: strong expected cash flow growth over the next three years, driven by new projects; potential value in the Strip site where the Stardust now sits; and the low price-to-cash flow multiple of Boyd's stock relative to other operators.

Davila projected Boyd's cash flow would increase 45 percent to $313.5 million by 2004, driven by gains from the Borgata in Atlantic City and Delta Downs in Louisiana. The Borgata, set to open in 2003, is a $1 billion joint venture between Boyd and MGM MIRAGE.

"Boyd Gaming is well positioned to capitalize on the intelligent growth profile established by management," Davila wrote. "If all of (Boyd's) existing properties perform even moderately well, then upside (in stock price) should materialize."