The Passed Seven
by Paul Larson (TMF Parlay)

MARKET CLOSE              5/2/97   5/9/97
CBOE Gaming Index (GAX):  205.76   218.72 (+6.30%)
Nasdaq Composite:        1305.33  1335.05 (+2.27%)
S&P 500 (SPX):            812.97   824.78 (+1.45%)

Chicago, IL (May 10, 1997) -- The markets continued their bullish ways this week while the gaming industry remained the place to be. After rising over 7% last week, the GAX gaming index came out with an encore performance this week with a 6.30% jump forward. Here we are seven trading days into May and the GAX is already up 12% on the month. Totally excellent, dude!

The GAX's move up is long overdue since the index is still roughly 35% off its yearly high even after this week's move. Calling it a bounce would not be misnomer. Decreased interest rate fears as well as the possibility of a capital gains tax cut certainly had something to do with the market's strong showing this week. Whatever the cause may be, let's hope the good times keep rolling.

ANCHOR GAMING <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: SLOT)") else Response.Write("(Nasdaq: SLOT)") end if %> was one of the more notable "ups" for the week after it rose $5 3/8 to $33 1/4 on Friday. There was no news from the company to cause the move, but Fools familiar with the stock realize "volatility" and "Anchor" are words that often share the same sentence. It is no secret that this Fool likes Anchor's potential at these stock levels. I like the stock so much, I gave it to my mother! Check out my Mother's Day piece about Anchor for more information on the company.

GRAND CASINOS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: GND)") else Response.Write("(NYSE: GND)") end if %> also continued its upward ways this week. The stock ended trading Wednesday up $1 1/4 to $14 1/8 on four-times normal volume after the Wall Street Journal mentioned the company as one that had seen inside buying in the recent past. This shouldn't come as news to any regular readers of this column since in last week's update I mentioned the buy. Even days before I had mentioned it, news of the insider buy was all over the Grand Casinos message board the Fool has on AOL. I am still amazed at the leg up those who use this medium have over those stuck reading day old (or in this case, weeks old) news.

STATION CASINOS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: STN)") else Response.Write("(NYSE: STN)") end if %> announced that it fully expects its new Sunset Station casino near Las Vegas to open slightly ahead of schedule on June 10. This will be the company's fourth casino in Las Vegas and sixth casino in total. All four of Station's Vegas casinos are "off the strip" units that tend to cater to locals.

Beyond the good news from Station, most of the news this week was not positive at all. To exemplify this statement, let's look at CASINO DATA SYSTEMS' <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CSDS)") else Response.Write("(Nasdaq: CSDS)") end if %> earnings. The company announced that it had lost $3.2 million in the first quarter versus the $1.6 million in earnings the company had in last year's first quarter. Revenues were down to $13.2 million from $14.9 million, gross margins declined to 28% from 53%, and to top it off the company had negative EBITDA of $3.8 million versus positive $3.0 million. The company had given profit warnings in the previous months and they held their word -- the results were plain ugly. It is almost scary to see how quickly Casino Data's fundamentals have deteriorated. To the company's credit, progressive jackpot revenues were up and the company is spending slightly more money on research and development. Regardless, the company has dug itself into quite a hole.

Another ugly earnings report was brought forth by ARGOSY GAMING <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: AGY)") else Response.Write("(NYSE: AGY)") end if %> this week. The company reported it lost $9.0 million, $0.37 a share, in the first quarter. The company had EBITDA of $11.6 million versus $10.9 million it had in last year's first quarter. This is particularly disappointing since many were looking for the company's Lawrenceburg, Indiana casino, which opened last December, to contribute more to the bottom line. As expected, Lawrenceburg did significantly better than the rest of the company's riverboats which all had sharply negative comparisons. Argosy's exposure to the hyper-competitive and over-regulated Missouri market certainly didn't help the company. Argosy has a larger permanent casino opening in Lawrenceburg later this year that should help the company further, but it remains to be seen if the company will be able to scale the nearly $12 million in interest expenses per quarter the company is realizing. As we often say, stay tuned!

STRATOSPHERE <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: TOWVQ)") else Response.Write("(Nasdaq: TOWVQ)") end if %> announced this week that its consolidated cash flow for the month of April was $1.357 million. This brings the company's average monthly cash flow for the previous seven months to $1.674 million -- a far cry from the $2.25 million average the company needs in order to fulfill its bankruptcy agreement with its bondholders and Grand Casinos. This Fool thinks pigs will fly before Stratosphere can get its average above $2.25 million before this summer. Therefore, it looks extremely likely that some sort of renegotiation is likely between the company's bondholders and would-be savior Grand Casinos.

Link of the week

This week finds STATION CASINOS' <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: STN)") else Response.Write("(NYSE: STN)") end if %> corporate web site perking the interest of this Fool. In addition to detailed information concerning all of the company's casinos, there is a wealth of newsworthy information. I think the thing that caught my eye is maybe how well designed the site is. Again, if you're bored...

http://www.stationcasinos.com

Earnings Summary

The earnings season is slowly fading away. A new feature this week is a comparison to the year pervious results. This should give a better picture to the trends that are occuring in the sector. Without further delay:

Company                       1997             1996
Argosy (AGY)                 ($0.37)          ($0.04)
Ameristar (ASCA)              $0.12           ($0.03)
Boardwalk (BWLK)             ($0.06)          ($0.15)
CDS (CSDS)                   ($0.18)           $0.12
Coin Bill Validator (CBVI)    $0.08           ($0.20)
Sodak (SODK)                  $0.06            $0.12    
Stuart Entertainment (STUA)  ($0.08)           $0.13

Private companies
Coast Resorts            ($1.6 million)   $1.3 million

Good luck this week!

Did You Know. . .
The Trump Castle mortgage bonds are rated Caa according to Moody's, the same rating Stratosphere, Claridge, and Harrah's Jazz (New Orleans) share?

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