PNK 3Q REPORT CARD

In an effort to evaluate performance and as a follow up to our YouTube, we compare how the quarter measured up to previous management commentary and guidance

 

 

OVERALL: 

  • WORSE - PNK missed our Street low adjusted EBITDA estimate as trends deteriorated in September. 

 

ASCA SYNERGIES

  • BETTER:  Mgmt said they are even more confident that they will realize more than the targeted $40MM in synergies than they were last quarter
  • PREVIOUSLY:  
    • We still believe that we are going to be able to not only meet the goal of $40 million in synergies, but we believe that, from what we've had exposure to up to this point, we're going to be able to exceed that.
    • There is a large portion of that that is entirely driven by combination of public company costs, i.e., one board, one set of financials, as well as integrating the teams in effectively, mostly down in Las Vegas. We have done an enormous amount of work on this, and while there is some effect on the margin by virtue of Lumiere, the reality is that the scale of the company and our ability to realize savings through better procurements, a better marketing program that will look to do best practices, really remains largely unchanged.

CUSTOMER TRENDS

  • WORSE:  Operating environment continues to be challenging.  September was a disaster and was the prime contributor to the big earnings miss.  However, revenues in October have been sequentially better.
  • PREVIOUSLY:  
    • In terms of guest behavior, in the second quarter, we saw trips decline at a greater rate than spend per trip. Meaning that people came less often, but their spend per trip was pretty much in line with historical levels.
      • Midwest it is a little bit more pronounced than down South, but nonetheless it's softness that we're seeing pretty much across the portfolio.
      • The impact has been more pronounced at the lower tiers

L'AUBERGE BATON ROUGE

  • SAME:  The property continues to grow the market with the hotel producing the 2nd highest REVPAR at the company.  Mgmt believes the market remains underpenetrated. 
  • PREVIOUSLY:  We continue to see strong guest acquisition and growing loyalty among our guests. Repeat visitation is very strong, with over 55% of our guests returning for multiple trips. The hotel continues to be a good story, with occupancy now in the mid-90s consistently. And our regional high end business continues to grow every month, although at a lower pace than we had originally anticipated.

L'AUBERGE LAKE CHARLES RENOVATION

  • SAME:  PNK has completed the renovation of their standard hotel rooms and have received very favorable guest feedback. 
  • PREVIOUSLY:  The second phase of the renovation will begin this fall after the busy summer season.

HORSESHOE CINCINNATI IMPACT

  • WORSE:  While mgmt seems optimistic on Belterra's ability to withstand the Cincinnati competition, we would note that their 3Q gaming revs fell 15% and the promotional environment remains fierce.
  • PREVIOUSLY:  The impact of Horseshoe Cincinnati has been less than anticipated so far.

BOOMTOWN NEW ORLEANS

  • SAME:  The additional guestrooms have helped the property.  Mgmt sees more upside ahead. 
  • PREVIOUSLY:  Finally, in New Orleans, we continue to see an improvement in the operating performance of this property

RIVER DOWNS

  • SAME:  The project budget remains $209 million, excluding license fees, original acquisition costs, and capitalized interest, and is scheduled to open in May 2014.
  • PREVIOUSLY:  The facility is well underway and we're excited about bringing the property into our portfolio in the second quarter of 2014.

CORPORATE EXPENSE RUN RATE

  • MIXED:  While mgmt said on an apples-to-apples basis, corporate expense fell $4MM YoY, it is not entirely clear.  The accounting change made comparisons difficult.
  • PREVIOUSLY:  
    • We've been running right around $5 million or so, call it mid-$5 millions on the current set of portfolio, and that's the set we have that clearly we're working through that as it relates to the combined company.
    • So while I don't expect if we were to, without the acquisition, that that number will change in any material way in that $5 million to $5.5 million per quarter, certainly we'll recalibrate that and give you some parameters once we complete the acquisition.

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