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Howard Stutz
 

Penn National still interested in Strip property

9 February 2009

LAS VEGAS, Nevada -- Casino operator Penn National, which quashed rumors last month that it was buying The Mirage, said Thursday it was still interested in owning a casino on the Strip.

During a conference call with analysts and investors, Penn National Chairman and Chief Executive Officer Peter Carlino said prices were too high.

"We would love to get a Strip property," Carlino said. "But we believe selling multiples now don't reflect reality. Our interest is clearly only in a Strip property, something that will benefit our current customer base around the United States and Canada. I think we are going to have to let this play out longer."

In the conference call, Penn National Gaming said it lost $378.6 million in the fourth quarter and told investors its first-quarter profit won't meet expectations.

The Pennsylvania-based gaming company said it lost $4.77 per share in the quarter ended Dec. 31, reversing a fourth-quarter profit of $32.2 million, or 36 cents, a year ago.

Analysts polled by Thomson Reuters predicted that Penn National would earn 37 cents per share in the quarter.

Penn National has about $1.5 billion in cash, the proceeds from an aborted private equity deal.

Stifel Nicolaus gaming analyst Steven Wieczynski said Wall Street is waiting for the company to make its move on the Strip.

"Until Penn shows its hand in regards to acquisitions or capital deployment, an overhang will remain over the shares," he said in a note to investors.

In the quarter, the company said a noncash impairment charge of $392.6 million and lobbying costs of $24.9 million contributed to the net loss. The lobbying costs were associated with the company's successful effort last November in convincing Ohio voters to reject a casino initiative backed by rival Lakes Entertainment.

Penn National reported revenues of $571.1 million, a 2.5 percent decline compared with $585.8 million in the same quarter a year ago.

"In our view, these were solid results in light of incredibly tough industry fundamentals," JP Morgan gaming analyst Joe Greff said.

Penn National told Wall Street it thought its first quarter earnings, which cover the first three months of 2009, will be $33.8 million, or 31 cents per share, far below analysts estimates.

Separate from earnings, Penn National announced it wouldn't exercise its option to build a new casino in Atlantic City.

Penn National shares jumped in value on the Nasdaq National Market despite the quarterly loss, gaining as much as 23 percent during the day. The company closed at $20.83, up $3.37, or 19.3 percent.

Penn National still interested in Strip property is republished from Online.CasinoCity.com.