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Boyd considers Fremont casino expansion

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February 24, 2020 By Richard N. Velotta

Expanding the casino at the Fremont in downtown Las Vegas is one of the options Boyd Gaming Corp. is considering with free cash flow that continues to grow for the Las Vegas company.

Keith Smith, president and CEO of the regional gaming company that also is one of the largest locals casino operators in Southern Nevada, said a strong fourth quarter has encouraged the company to consider its options and one of the two potential capital expense options is expanding the Fremont casino.

“We don’t have specific parameters at this point, but we’d be thinking about the casino,” Smith said Thursday in a conference call with investors after the release of fourth-quarter earnings.

“We’ve owned a piece of land kind of on the back side of the Fremont for awhile,” he said. “We’ve looked at a number of different projects there. The casino is at capacity many nights a week and what we really need there is additional casino space. We’re thinking about it as a very modest expansion.”

Potential cap-ex

The Fremont expansion is one of two prospective cap-ex projects Smith noted in the call. Another is to take advantage of new legislation passed in Louisiana that allows casino companies to transform riverboats to land-based casinos, an option for Boyd’s Treasure Chest property.

Smith listed no cost estimates or preference to projects during the call. He also said the company could consider further reducing debt or increase shareholder value with stock buybacks or higher dividends.

Boyd reported record adjusted cash flow numbers for its three downtown properties and adjusted numbers for its Southern Nevada locals markets were the highest since 2005.

The company reported net income of $24.3 million, 21 cents a share, on revenue of $833.1 million for the quarter that ended Dec. 31. A year earlier, the company had net income of $22.9 million, 20 cents a share, on revenue of $791.6 million.

A survey of 12 analysts had projected earnings on average of 47 cents and revenue of $825.6 million.

Smith said Southern Nevada’s robust economy has improved the company’s fortunes as has an increased customer base due to the popularity of sports betting.

Smith cited a 1,000-room expansion in downtown Las Vegas with the expansion of the Downtown Grand this summer and the opening of Circa in December. He also applauded the expansion of the Las Vegas Convention Center, March’s return of the massive ConExpo-Con/Agg construction industry trade show, April’s NFL Draft event in Las Vegas and the relocation of the Raiders from Oakland to Las Vegas for their 2020 season as drivers of the local economy.

“When we look at the calendar generally and you think about a convention like that (ConExpo) coming in town that has been in town for awhile and you think about the Raiders. It’s just more activity in town overall. It complements an already strong locals environment,” he said. “We run pretty high occupancies and pretty good room rates as it is. Obviously, when the town’s full we’re able to leverage it out even further, but it isn’t just about one event. It certainly is helpful, but it isn’t driven just by that.”

Gaming industry analyst Barry Jonas of Atlanta-based SunTrust Robinson Humphrey told investors in a Thursday report that he doesn’t expect the opening of Circa to hurt Boyd’s profitability.

“While we could see some modest headwinds from initial trialing around the Circa property once opened late this year, ultimately we think Boyd’s unique Hawaiian model is fairly sticky and likely sees limited impact,” said Jonas, referring to the company’s heavy marketing influence that draws Hawaii residents to Boyd’s downtown properties.

Additional traffic

Smith said sports betting has driven additional traffic in the company’s Midwest and South properties, and it isn’t the winning bets driving revenue.

“The strong underlying trend we’re seeing in our Midwest and South segment have been further strengthened by this year’s introduction of sports betting at five of our regional properties’ — Blue Chip, Belterra Resort (in Indiana), Diamond Jo Dubuque, Diamond Jo Worth (in Iowa) and Valley Forge (Pennsylvania) — sportsbooks attracting new faces and expanding our customer base,” Smith said. “Once they’re on property, these new customers are doing more than placing a wager on the game. They’re visiting our restaurants and our bars and playing in our casinos.”

Boyd partners with the daily fantasy sports company FanDuel to operate regional casino sportsbooks. It is considering opening a sportsbook at the company’s Par-A-Dice casino in Illinois.

Boyd stock moved higher on the New York Stock Exchange Thursday, up 65 cents, 1.9 percent, to $34.74 a share on volume twice the average daily volume. After hours, shares retreated $1.74, 5 percent, to end at $33 a share.


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