The Company develops, owns and operates casinos and related hotel, food and beverage, entertainment and other facilities, with seven properties in operation in Missouri, Iowa, Mississippi, Colorado and Nevada.
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“The Rising Star” Ameristar Casinos founded way back in mid-50s, is one of the oldest operators of casinos in the US. The business is spread over five states where it also runs hotels, entertainment and other facilities. Missouri generates over 60% of the revenue, where half of the company’s property, including the famous Ameristar St. Charles and Ameristar Kansas City, is located. The company’s major drivers have always been casinos, which contribute to over 80% of the tally. Most of the casino revenue is generated by slot machines.
Shares of Ameristar are presently seeing a big rally. The sudden demise of the company’s CEO and majority stake holder, Mr. Craig Neilsen, led to speculation that the stock will go on the auction block. The recent acquisition boom in the casino industry, as we saw in the case of Harrah and Casino Station, backed the speculation. However, looking at Ameristar fundamentals it is also a good bet. The company is witnessing a steady growth in the top line, enhanced by the good performance of its latest casino, Black Hawks. Revenue will further grow thanks to the expansion project of Ameristar Vicksburg with 800 new gaming positions, and renovations and enhancements of 400 new rooms at Ameristar St. Charles. They are estimated to open in 2007. Additionally, the recently completed principal highway connecting Black Hawk and Denver will also help Black Hawk in attracting more guests and in establishing a healthy market share in the Colorado market. So, considering the company’s operations in diversified markets, a healthy pipeline, and improved margins due to recent cost cutting measures, Ameristar could be the next rising star of the stock market.
The new CEO John Boushy is having some massive plans to take Ameristar forward. The company has targeted to double its bottom line in the next three to five years, primarily led by new accusitions and cost cutting measures. This strategy however farfetched it might sound seems achievable, when the massive $1 billion available for acquisition and expansion of gaming operations is considered. As part of this strategy Ameristar recently announced a $675 million acquisition of Resorts East Chicago, located in about 25 miles from Chicago, mainly to tap in the booming Chicago gaming space. The 291-room hotel, with over 1,900 slot machines and 60 table games is sure to boost the inflows in the coming quarters.Ameristar ended the fiscal fourth quarter 2006 on a high note, with many of the properties registering a healthy growth in top line. The reduction by over 16% in promotional spending helped the company to improve the margins and aided in registering a stronger net income of $17.8 million compared with $14.3 million, a year earlier. In the past month company’s stock have dipped by over 10% as a result of lower first quarter guidance and a doubt about company’s short term cash flow. Looking ahead in 2007, company’s fundamentals remain strong, with properties diversified into number of key markets and various expansions underway. Moreover, the improvement in margins is expected to sustain throughout the year having a positive impact on the income. Further, Ameristar’s long term credentials look very appealing amidst of its aggressive growth strategy and few more anticipated acquisitions acting as a catalyst for future growth, taking the stock forward from these pulled back levels.