REIT value mostly in the stock as size of equity offering and timing of split disappoints investors. Meanwhile, an EBITDA miss is released
CONF CALL
- 3Q: 1st anniversary with ASCA
- Positive signs on revenue front, could benefit Q4
- 3Q: visitation and spend per visit have improved sequentially; particularly encouraging in core properties and ASCA properties. October looks pretty good.
- ASCA integration: Increase in VIP play of 8% and trips increased 4%; 7% growth in top 3 tiers
- ASCA portfolio: REVPAR: +6%
- Universal card integration on track for 2015
- Marketing SS down 60bps YoY; promotional environment across portfolio is rational and stable
- New Orleans, Belterra Park, and Lake Charles underperformed in 3Q
- Belterra Park: sees some improvement but very disappointed
- St. Louis (2 properties): grew market share to 48% RC tied its highest quarterly share. St. Charles table share at highest level since 2007.
- L'Auberge Baton Rouge: performed well. Strong VIP play and hotel performance and controlled marketing spend helped EBITDA.
- Lake Charles: all-time revenues ; flow through hampered by certain items described in earnings release
- Macro environment better and revenues have flattened
- Sees opportunities to reduce food and labor costs
- Lake Charles: low table hold and special costs
- Belterra Park: expect 4Q EBITDA to be better than 3Q EBITDA; expect positive EBITDA in 2015
- $61m cost ASCA synergies at end of 3Q
- Team retention: $1.5m accrued in 3Q; retention costs will continue through 2Q 2015
- New Orleans hotel: expect to open by end of 2014; budget $20m (incurred $17m through 3Q 2014)
- Continue to reduce leverage and expect to see continued improvements in leverage
- Expect equity issuance in 2015; options include rights offering to existing shareholders
- REIT: past evaluation stage, will submit IRS private letter filing in next 45 days. E&P purge: <$100m through 2016.
- OpCo will not have meaningful taxes for a substantial amount of time
- REIT protection shareholder vote in Summer 2015
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REIT will have broader mandate than only gaming
Q & A
- Belterra Park: still believe there is additional revenue that they're not capturing right now. It's an awareness issue. If revenues don't grow in 2015,
- REIT:
- Incremental costs related to REIT: legal/advisory work (more of a 2016 event)
- $1bn equity issuance: not set in stone yet but it is a conservative estimate. Dilution concerns will be addressed.
- IRS private letter ruling may not come until mid-2015
- Will be a diversified REIT - not just gaming
- Total NOLs (Federal, State and carry forwards) at end of 3Q 2014: tax shield of roughly a billion
- $700mm ($550m + Lumiere sale)
- $300 goodwill
- Expect leverage post-spin to be lower than today's levels
- PNK calling of bonds? Too early to comment.
- Tax-free spin jeopardized by equity offering? No.
- Improvement in consumer trends: broad-based across all regions, particularly in >$100 segment
- Saw revenue growth in October
- Inflection point in regional gaming? Maybe a little early. But optimistic on early November too.
- Majority of bad weather impact happened in the Midwest and began in late Dec2013/January 2014.
- Monarch casino in CO: PNK likes what they have done with the renovations.
- Black Hawk market could use more rooms