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ASCA reports Q4 EPS on Wednesday and we are below the Street at $0.11. Below we’ve got a recap of management’s forward looking comments from the Q3 earnings release and conference call.

We are projecting Q4 EBITDA and EPS of $72.3 million and $0.11 versus the Street at $74.1 million and $0.13.  For 2010, we are only slightly behind the Street estimate, $1.02 versus $1.05.  ASCA is the only regional gamer where our 2010 estimate is close to the Street.

While lacking a catalyst, ASCA is unique in that it carries a significant free cash flow yield on net free cash flow, not just cash flow before discretionary capex.  This company is a cash cow.  We calculate a 13% net FCF yield, even after today’s big 4% stock move.  It is conceivable ASCA could grow it’s free cash flow by at least 3% over the next several years.  Management’s cash flow outlook will be an important topic of discussion on the call.

 

YOUTUBE FROM Q3 RELEASE/CONF CALL

 

Property level commentary

  • Blackhawk: “We've had a substantial improvement in net revenues during October and an even more substantial improvement on adjusted EBITDA.”
  • “But at least during the month of October, the first month of the hotel being opening, the characteristics of the occupancy and the cash demand and cash ADRs are generally more of what we would see on a mature hotel instead of a brand-new one”
  • “We're starting to see some signs of impact from an intensive management effort including in Vicksburg.”
  • “Well, I think part of the issue with Vicksburg is the general economy. The Mississippi economy has never been the strongest that we operate in and with the current recession, there's been significant impact there. And there is additional competition, there's more gaming supply in the market which has affected our market share. I think we're seeing a little bit of light at the end of the tunnel in relationship to operating our new facility very efficiently and maximizing the customer satisfaction of coming to the new facility now…We're starting to see some margin improvement down there.”
  • “The changes we're making at Vicksburg will actually be completed during the fourth quarter. I don't know how much benefit we're going to really see in the fourth quarter that's demonstrable from that. I think we'll hopefully see some focus on margins down there irrespective of the changes.”

 

General Trends & Outlook

  • “We're seeing a little bit less spending per trip by patrons.”
  • “I do think it's going to be a longer and slower trajectory in terms of recovery from that in consumer spending but I think it's going to happen.”
  • “I think in East Chicago, we're looking a little bit more at the global issue with the economy and starting to see unemployment come back down. And I think in that particular market, unemployment is going to continue to go up for another quarter or two, no matter what your economist say.”

 

Balance Sheet/ Cash Flow and other

  • “We obviously don't anticipate borrowing any money in the fourth quarter.”
  • “We expect our leverage ratio will continue to improve. However, our fix charged coverage ratio is expected to decline slightly due to the increase in interest payments resulting from the unsecured notes offering.”
  • 2010 Capex: “What we're looking at for the coming year is somewhere in the neighborhood of say $75 million to $80 million.”
  • 2010 Capitalized Interest: “It's going to be very, very minimal. Nothing that you wouldn't want to take into account and booking at EPS.”
  • 2010 tax rate: “Next year, it should still be 42%, 43% on an annual basis.”