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In-line quarter but turnaround pushed off to Q2.

 

"As expected, fourth-quarter comparisons were the best of the year, as business conditions and consumer confidence continued to improve. As the economic recovery gains momentum, we anticipate we will see increases in both visitation and spend-per-visit, resulting in a return to consistent growth across our business this year."

- Keith Smith, President and Chief Executive Officer of Boyd Gaming

HIGHLIGHTS FROM THE RELEASE

  • Locals Las Vegas: "local economic conditions began to stabilize."
  • "While we continued to expand our leading market share Downtown, business results were impacted by our Hawaiian charter operation."
  • Midwest and South: The "increase was the region's best year-over-year comparison in five quarters. The gain was primarily driven by strong business volumes at our southern Louisiana properties."
  • Borgata: "While we were encouraged by growth in slot win, non-gaming revenue and overall market share, these gains were offset by higher promotional expense, declines in table game hold and volume, and increased regional competition."

CONF CALL NOTES

  • Core business is improving and they are on track to begin reporting improvements starting 2Q11. 1Q11 may reflect a slight decline YoY given the difficult comparisons in the Las Vegas Locals market. 1Q was also impacted by severe weather in the Midwest. They do expect a sequential pickup in EBITDA though.
  • Convention and meeting business looks to be poised for additional growth in 2011 in Las Vegas. Projected that their group business in Las Vegas will be up 15% YoY.
  • Even a modest increase in spend per visit - $5/ per visit - will lead to a $20MM increase in Las Vegas locals EBITDA
  • Optimistic about the legislative changes in AC and the potential impact they will have on the market there
  • Grew market share in Locals LV by 20 bps - with the strongest growth at Orleans - which has benefited from a new marketing campaign and a pickup in group and meeting business
  • Increasingly encouraged by the trends in the locals market, but are concerned by the promotional activity. Competitor [Station Casinos] introduced a new aggressive campaign.
  • Downtown - 35% market share. However, higher fuel costs impacted their quarter and should continue to do so.
  • Rated play from their Hawaiian tourism increased and is continuing to perform well.
  • Treasure Chest grew their market share by a full percentage point
  • Midwest and South: Winter weather cost 3MM in EBITDA
  • Borgata continued to outperform the market despite lower than normal table hold and new regional competition.  Promotional spend increased due to rising competition but remains low compared to others in the market. In January slot revenues were flat YoY and they had the highest slot share
  • 4.2x Sr Leverage ratio vs. 4.5x, total leverage ratio was 7.0x vs (7.75x)
  • Borgata was also in compliance with their covenants - their leverage was about 5x at 12/31/2010 (they don't have financial covenants).  Called the remaining balance of their 7.125% notes.
  • $40-42MM of corporate expense for 2011 - spread evenly throughout the year
  • D&A for 2011: $195-200MM - $130-135MM attributable to BYD, balance to Borgata
  • Share based comp of $12MM for 2011
  • Consolidated Interest expense for 2011: $145-150MM, Borgata $85-87MM  - total $230-237MM 
  • Tax rate of 35% for 2011
  • Capex: $50MM in 2H2011(maintenance), Borgata will start a room remodel starting in 2H2011 lasting through 1H2012 - $40MM in 2011 ($25MM spend on remodel and $15MM on maintenance). 40MM target also for 2012.

Q&A

  • Are they seeing higher spend per visit yet or just more frequency?
    • Frequency is getting better not seeing a lift in spend yet
  • Impact of oil prices on their business
    • Impact on charter operations in Downtown
    • Airfare impact too
    • Unclear whether their So Cal business will be impacted by higher fuel
    • Haven't seen any impact yet
  • Don't think they have any deferred maintenance at any property but have postponed room remodel.  There are about 700 rooms that need remodeled.
  • Coin-in was up in the locals market in Jan 2011
  • In Q1 2011 - their comments were in reference to both revenue and EBITDA
  • Cash rooms in the LV Market account for 25-35% of their business mix.  Trends are continuing to strengthen in 2Q.
  • Opening of shopping area next to the Sun Coast should be positive. They will be opening the retail in phases and are working with the developer to promote the opening.