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Gaming Guru

Howard Stutz

New Ameristar executives say company not for sale

2 February 2007

LAS VEGAS, Nevada -- Executives from Las Vegas-based Ameristar Casinos wanted to make it perfectly clear to gaming analysts and investors Thursday that the company isn't on the auction block.

In fact, Ameristar has loftier goals.

Ameristar, which operates seven casinos in five states, reported quarterly earnings for the first time since the death last November of company chairman and founder Craig Neilsen.

New Ameristar Chief Executive Officer John Boushy, while paying tribute to Neilsen, said an aggressive expansion program at the company's casinos in Black Hawk, Colo.; St. Charles, Mo. (near St. Louis); and Vicksburg, Miss.; will fuel earnings through the end of the decade.

"Over the next three to five years, our goal is to double our (cash flow)," Boushy said. "We intend to grow through our continued commitment to being the most profitable operator in our markets along with high-quality investments that produce attractive incremental returns at existing properties."

Ameristar said its net earnings were $17.8 million, or 31 cents per share, in the fourth quarter ended Dec. 31, up from net earnings of $14.3 million, or 25 cents a share, a year earlier. Analysts polled by Thomson Financial had forecast fourth-quarter earnings of 25 cents a share.

Revenue rose less than 1 percent, to $244 million from $243.8 million.

Ameristar's cash flow, defined as earnings before interest, taxes, depreciation and amortization, was $66.1 million, a 6.4 percent increase compared with $62.1 million a year ago.

"Our record fourth quarter and annual financial results are a testament to our ability to profitably grow the Ameristar brand by providing the highest quality facilities in our markets," Boushy said.

Many gaming analysts speculated that Neilsen's death would lead to Ameristar's sale. However, the company said it is moving forward.

Prudential Equity Group gaming analyst Joel Simkins, who began covering Ameristar in January, said the company will be challenged in its key operating markets this year: St. Louis and Black Hawk.

Construction delays because of a snowy winter in Colorado have set back the building of a new hotel tower at the Ameristar Black Hawk.

Ameristar's resort in St. Charles will face competition from two Pinnacle Entertainment casinos under construction in neighboring St. Louis. The first casino, near the downtown St. Louis Arch, is expected to open later this year.

"We think investors are best served to stay on the sidelines," Simkins said in an investors note. "We think St. Louis will have a difficult time absorbing the new capacity plus other competing property upgrades. With stiff competition in Black Hawk and St. Louis particularly, we think returns are going to be limited at least initially out of the box."

Morgan Joseph gaming analyst Adam Steinberg also cited the winter weather as a challenge for the company.

"We have taken a cautious approach to the quarter because of weather-related impacts to revenue generation in St. Louis and in Black Hawk," Steinberg said.

"However, we believe there is upside to our estimates based on continued cost controls and better-than-expected margins at the company's properties," he said.

Ameristar shares rose 96 cents, or 3.15 percent, Thursday to close at $31.48 on the Nasdaq National Market.