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    MARKET EDGES

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Louisiana posted a surprisingly strong November with total gaming revenues up 6%. PNK was the standout, generating a 14% increase at its Lake Charles, New Orleans, and Shreveport properties combined. A lot of the increase was due to the influx of hurricane relief workers and the favorable calendar to a lesser extent. Even absent these factors though, Louisiana still outperformed the country.

BYD also performed very well with a 12% increase at its three properties combined. LA is important to BYD, providing approximately 15% of its EBITDA, but not nearly as important a state as it is to PNK. PNK generates 75% of its EBITDA in Louisiana. The strong first two months of the quarter provides a degree of near-term earnings visibility for PNK not seen in this sector for some time.

We’d approach this optimism with some degree of caution. Even though November was strong and December looks decent thus far, unemployment levels in Texas and Louisiana have been increasing at a faster rate than much of the country, albeit off a lower base (see our 12/7/08 post “THINK LOCALLY”). Low gas prices could be the offset.

We continue to believe PNK makes an attractive acquisition target for PENN (see “LIKE PEANUT BUTTER AND CHOCOLATE”, 11/11/08). While PENN does have some Louisiana exposure through its Baton Rouge property, it remains small. We’d love to see PENN make this Louisiana Purchase.