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Analysts Disagree Over Park Place Rating

11 January 2002

LAS VEGAS –– As reported by BusinessWeek Online: "Growth for casino operators usually lies in building new, ever-snazzier resorts. Thus, Park Place Entertainment's (PPE ) decision to postpone construction of a $475 million hotel tower at Caesars Palace in Las Vegas could be perceived as something of a letdown for investors. Those in the know see something else.

"The world's largest gaming company is expected to post $4.7 billion in revenues for 2001 -- impressive for a recessionary year, considering that's down only slightly from 2000's $4.9 billion. Its willingness to exercise fiscal prudence in the post-September 11 world is part of what makes the stock a good bet, say its loyal fans.

"…Shares of Park Place, the name behind Caesars and other resorts including Paris Las Vegas, Bally's, and the Las Vegas Hilton, have rebounded briskly since the terrorist attacks -- rising some 58%, to $10, from a post-September 11 closing low of $6.31. That's still about 22% below last year's high of $12.86, which the stock hit on June 4, but Standard & Poor's analyst Thomas Graves believes it could easily approach $12 in 6 to 12 months.

"…By way of comparison, Graves says, rivals MGM Mirage (MGG ) and Harrrah's Entertainment (HET ) each trade at more than nine times projected 2002 EBITDA.

"`If you look at it on a multiples basis, Park Place continues to trade at a discount to the group,' says Bryan Maher, lodging-and-gaming analyst at Credit Lyonnais Securities in New York, who has a buy rating on the stock. `Yet it is the largest gaming company in the world and among the most diversified.'

"…Analysts think Park Place has enough financial flexibility in 2002 to reduce debt, buy back shares, and even begin new construction, which can boost earnings-per-share figures. Graves is looking for the company to have about $1.15 per share of free cash flow, or cash available after expenses for maintaining existing properties.

"…Not all analysts are as optimistic. Joseph Greff, senior gaming and lodging analyst at ABN AMRO in New York, agrees that Park Place's shares are relatively cheap. But Greff, who rates the shares a hold, says he sees no clear catalyst that can move the issues much higher.

"What's more, he says, Park Place is more dependent than competitor Harrah's on revenues from Las Vegas, which has seen a big drop-off in customers arriving by air. Harrah's, the second-largest casino operator in terms of revenue, gets more business from drive-to properties in the Midwest, South, and Atlantic City. Park Place faces `a number of challenges,' Greff says…"

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