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Analysts See Few Problems for Casino Companies

29 November 2000

LAS VEGAS, Nevada – Nov. 29, 2000 -- As reported by the Las Vegas Review Journal: ``Merrill Lynch predicts Las Vegas visitor growth and Strip resort cash flow will decline through 2002.

``The forecast sounds like bad news for the city's casino operators, but Merrill Lynch estimates that the largest four casino companies will substantially increase their earnings per share in 2002 over this year's and next year's predicted results.

``Gaming analysts David Anders and Salvatore DiPietro released Merrill Lynch's major casino operator forecast for 2002 last week, and estimated that improved casino-by-casino results would allow the big four operators to record improved earnings per share, despite declining improvement in visitor growth and cash flow.

``The four largest casino operators, all Las Vegas-based, are Park Place Entertainment, MGM Mirage, Harrah's Entertainment and Mandalay Resort Group.

``Anders and DiPietro note that because the four large-capitalization casino companies realized lower returns on their newly opened megaresorts and were unable to pay down debt as quickly as they had planned, they've decided to cease new project construction.

``Instead, the analysts believe the large-cap operators are now focused on fine-tuning operations, improving returns at existing properties and using available cash to pay down debt or repurchase company stock.

``…Anders and DiPietro note another statistic they believe augurs well for the Strip megaresorts: net demand.

``They believe net demand, which they define as visitor growth minus room growth, is a more accurate predictor of casino operator strength than growth in Las Vegas visitor volume.

``…Anders' and DiPietro's forecast for the big four operators:

``• Park Place earning per share will grow from 69 cents per share in fiscal 2000 to 81 cents in 2001 and 92 cents in 2002.

``• MGM Mirage earnings per share will increase from $1.67 in 2000 to $1.90 in 2001 and $2.12 in 2002.

``• Harrah's earnings per share to jump from $1.65 in 2000 to $2.10 in 2001 and $2.50 in 2002.

``• Mandalay Resort's earnings per share will climb from $1.65 per share in 2000 to $2.00 in 2001 and $2.28 in 2002.

``The Merrill Lynch analysts forecast Las Vegas visitor growth will decline from 6 percent this year to 3 percent in 2001 and 2 percent in 2002, but expect the decline to be more than offset by improved casino-by-casino results and limited additions to hotel and casino supply..."

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