Greyflannel (< 20)

Expanding on Foxwoods and Mohegan Sun Business Model and Implications for Rotate Black: ROBK

January 08, 2009 – Comments (0) | RELATED TICKERS: MGM , LVS , STN

In my last post I mentioned the development of Foxwoods and Mohegan Sun as a blueprint for the development of the proposed Catskills casino by the Seneca Nation of Indians.  I found several links which articulate the handle, win and number of slot on the Connecticut Department of Special Revenue website (links attached).

According to the website, Foxwoods began operations in January of 1993, at the tail end of an economically difficult time period, and for anyone who’s been to Foxwoods, in the middle of nowhere.  The casino began with 624 slot machines, quickly ramped up to roughly 1,500 and by the end of 1993 was operating 3,109 slot machines. 

The average win/day/slot machine was $365.  The range was $105, the month first opened, to over $585 in August, the month prior to expanding from an average of 1,441 to over 3,100.  Total slot machine revenue for the first year of operations listed on the CT state website is over $253 million.  Doing some back of the envelope math… exclude the state’s $80 million take leaves $173 million.  A 30% EBITDA margin equates to roughly $51 million. 

By scratching out a hypothetical situation… Assume a management fee of 25% and the management company would have a take of $11 million from JUST the slot machines.  With no debt and a lean operating structure, the lions share should flow to the bottom line.

Year two at Foxwoods… slot machine revenues exceeded $470 million from 3,555 machines averaging $363/day.  The state’s take was $129 million.  Using the same math above, the management company’s take would exceed $25 million from slot machines alone.

And just to be clear, I am using the 1993 and 1994 results listed on the CT website for Foxwoods, a hypothetical management fee, it could be lower, NY state could take a large percentage and I don't take into consideration an interest expense.  However, I think it illustrates the potential of the project, particularly when considering the proposed site is within 1.5 hours of 24 million gamers, which no other world class casino in the US can claim.

Again there are risks associated with investing in Rotate Black.  Please see my previous blog “A Compelling Play on Indian Gaming: Rotate Black – ROBK.”  The risks include Class III gaming approvals, financing and very thinly traded stock.

http://www.ct.gov/dosr/lib/dosr/Fosltweb.pdf

http://www.ct.gov/dosr/lib/dosr/mosltweb.pdf