Analyst boosts view of Boyd Gaming, Peninsula purchase "strengthens" casino operator

11 December 2012

By Howard Stutz

Credit Suisse gaming analyst Joel Simkins reinstated coverage of Boyd Gaming Corporation following the closure last month of the company’s $1.45 billion acquisition of Peninsula Gaming Corporation.

The transaction gave Boyd ownership of five casinos in three states, including the Kansas Star near Wichita, Kan. Following the deal’s closure, Boyd Gaming now operates 22 gaming properties in eight states - Nevada, New Jersey, Illinois, Indiana, Iowa, Kansas, Louisiana and Mississippi.

Simkins placed an Outperform rating on Boyd’s stock, based on the casino operator’s continued expansion into regional markets. He said the move “positions Boyd to benefit from a domestic consumer recovery.”

On Sunday, the Wichita Eagle reported the Kansas Star, which opened a year ago this month, had earned $158.8?million in gaming revenue between Dec. 20, 2011, and the end of October according to the Kansas Lottery Commission. The figure topped the revenue brought in during the same period by Kansas’ two other casinos: Boot Hill in Dodge City and the Hollywood Casino in Kansas City.

The results from the Kansas Star bolster Simkins’s somewhat contrarian view of Boyd; 16 analysts follow the company and there is only one other outperform rating.

“While the pessimistic case continues to center around Atlantic City – Boyd owns 50 percent of the Borgata – and Las Vegas, these segments will be less meaningful going forward,” Simkins said. “We believe the company’s recent experience integrating IP Biloxi foreshadows potential synergy upside as the Peninsula portfolio is integrated.”

Simkins also didn’t believe Boyd would explore converting parts of the company into a real estate investment trust, similar to the steps announced last month by Penn National Gaming.

“While Boyd has compelling diversification, we see the company’s high leverage and Las Vegas exposure as being gating factors to a potential REIT conversion,” Simkins said. “We see Boyd trying to create shareholder value through the pursuit of deleveraging acquisitions, same store investments, and growth projects, relative to financial engineering.”