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Howard Stutz

Share prices up double digits for Boyd, Pinnacle

1 May 2013

Regional casino operators Boyd Gaming Corporation and Pinnacle Entertainment, Inc. experienced double-digit increases in their average daily share price during April.

But much of the attention by the investment community focused on Caesars Entertainment Inc.’s plan to spin off several casinos and its interactive gaming subsidiary into a separate growth-oriented business.

Caesars, which is traded on the New York Stock Exchange, was the only casino operator out of eight companies charted by Las Vegas financial adviser Applied Analysis to see a decline in its average daily share price during the month.

Wall Street had mixed reviews of Caesars’ announced plan to place Planet Hollywood, the proposed Horseshoe Baltimore and Caesars Interactive, which owns the World Series of Poker, into the new company.

Caesars still would retain majority ownership of the businesses. The casino operator’s private equity ownership would make a $500 million payment to gain a stake in the new entity.

“While Caesars may be able to creatively unlock value through this transaction, we are cautious on near-term trends,” Credit Suisse gaming analyst Joel Simkins told investors. “Caesars continues to see a weak top line in regional markets, including Atlantic City, and a slow recovery on the Strip, particularly in its core demographics.”

Shares of Caesars saw two straight months of increases in its average daily stock price, according to Applied Analysis — 39 percent in March and 46 percent in February. In April, Caesars shares traded down almost 3.6 percent.

“We note that this is not a spin-off, and shareholders are not receiving equity interests in (the growth business) for free,” said RBC Capital Markets gaming analyst John Kempf. “Volatility is the same as the existing Caesars stock, which is admittedly high, but reflects the uncertainty of the potential for online gaming and the Baltimore project.”

The upward movement by Boyd Gaming and Pinnacle were for different reasons, Applied Analysis principal Brian Gordon said in a report to the firm’s clients.

Boyd posted a nearly 24 percent increase in its average daily stock price, in part because of several investment banks, including Barclay’s Capital and Morgan Stanley, upgrading their view of the company’s stock during April.

“We expect our May report to reflect similar improvements due to a late-month rally,” Gordon said.

Pinnacle Entertainment, which is acquiring Ameristar Casinos in a $2.8 billion transaction, saw its average share price jump nearly 17 percent. Shareholders of Ameristar signed off on the deal, and Nevada gaming regulators are expected to explore the transaction today .

Three of the four gaming equipment providers tracked by Applied Analysis experienced declines in their average daily stock prices.

Only WMS Industries, which is being purchased by lottery company Scientific Games, showed a slight increase of less than 1 percent.
Share prices up double digits for Boyd, Pinnacle is republished from