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Gaming Guru

Howard Stutz

Investors Bullish on Boyd Gaming

11 February 2005

LAS VEGAS -- The day after reporting record earnings in 2004, Boyd Gaming Corp. saw its shares shoot up to an all-time high Thursday as gaming analysts said the company is poised to take advantage of numerous growth opportunities well into the next decade.

In trading on the New York Stock Exchange, more than 3 million shares of Boyd stock were exchanged, well above the average of 468,500 shares. The price closed at $48.06, up $5.61, a 13.22 percent increase.

The company credited its purchase last year of Coast Casinos for its 38.4 percent increase in revenues and a 75 percent increase in adjusted earnings per share for 2004.

Gaming analysts said the planned 2006 opening of the $500 million South Coast, a 660-room hotel-casino on the Strip near Silverado Ranch Road, coupled with the expected redevelopment of the 63-acre Stardust site, gives the company continued growth opportunities.

"Boyd remains well positioned for growth over the next five to 10 years, with both short-term and long-term development opportunities as well as a strong balance sheet that should provide flexibility to pursue additional acquisitions," Deutsche Bank gaming analyst Marc Falcone said in a note to investors.

Following a conference call with gaming analysts Wednesday, Falcone called Boyd's purchase of Coast Casinos "a company-transforming event." Other gaming analysts echoed those sentiments in notes to investors.

Bear Stearns gaming analyst Joe Greff said Boyd will reap the benefits in 2005 from two expansions: in Atlantic City through the Borgata, which is undergoing a $200 million expansion of its public areas, and in Indiana, where the Blue Chip is in the middle of $150 million worth of enhancements. By 2007, the company will add 800 guest rooms to the Borgata.

"We continue to be impressed with Boyd's bookends of its gaming portfolio, the Borgata in Atlantic City and the Las Vegas locals market," Greff wrote. "During the fourth quarter of 2004, Borgata generated impressive growth in gaming and nongaming revenues and meaningfully accelerated profits, while Boyd's recently acquired Coast properties grew cash flow handsomely in the attractive Las Vegas locals market."

Susquehanna Financial Group gaming analyst Eric Hausler said the Coast purchase enhanced Boyd's balance sheet.

"Boyd is uniquely positioned in gaming for several years of outsized growth, in our view," Hausler wrote. "Borgata is light years ahead of the rest of the market. The two announced expansions will only extend its lead and provide Boyd (and MGM Mirage, which owns 50 percent of the Borgata) with continued growth through the end of the decade. With the Coast acquisition, Boyd generates 40 percent of its (cash flow) from the Las Vegas locals market, which may be the best same-store market in the country, with mid to high single-digit growth."