Inside Wall Street
HOW MIRAGE COULD SWEEP THE BOARD IN LAS VEGAS
After a hot winning streak last year, gaming stocks have gone cold. Shares in Caesars World, a premier Las Vegas operator, tumbled from 59 in February to 35 in July. Mirage Resorts, another big operator, dropped from 25 to 17 in three months. But some investors see a lucky ace spurring a comeback: takeovers.
Says one money manager at a $2 billion New York hedge fund: "We are buying for two reasons: We think the stocks have bottomed, and we see an industry consolidation and, consequently, big buyouts in the making." This pro has placed his biggest bets on Caesars, which has since climbed to 45, and Mirage, now trading at 20.
This investor thinks Mirage is out to acquire Caesars, whose buyout value he puts at $60 to $70 a share. He thinks Mirage Chairman and CEO Steve Wynn will attempt a friendly deal. "If he pulls it off, Wynn will own the damn town," he exclaims.
Oppenheimer's Steve Eisenberg says sources hint that Wynn has already looked at Caesars as a target--and it's clear he covets the gaming operator. "But we don't know whether or not he will pull the trigger," says Eisenberg, who says Caesars "is a great buy."
HIGH-ROLLER HEAVEN. Mirage's Wynn, the analyst says, has the deep pockets to pursue Caesars. Furthermore, he argues that a Caesars-Mirage combo would be a nice fit: Caesars has a large following of high rollers--plus the vast banks of slot machines that attract walk-in, mass-market players.
For its part, Mirage--formerly called Golden Nugget--has property: four Nevada casino-hotels, the largest of which is called The Mirage, whose 3,000 hotel rooms and 95,000-sq.-ft. casino accounted for most of 1993's revenues of $953 million. Next door is the Treasure Island, another Mirage-owned casino, with 2,900 hotel rooms and 75,000 sq. ft. of gambling space. Mirage also expects to have several new Las Vegas facilities operating in two years, including a $250 million casino-hotel on Mirage's Dunes Hotel property. This new project is co-owned by Mirage and Gold Strike Inn & Casino and will
aim at "value-oriented vacationers."
Caesars, with revenues of $983 million last year, owns two casino-hotels in Nevada, one in Atlantic City, and four hotels in the Poconos. Eisenberg expects earnings of $3.10 a share for the year ended July 30 and $4.10 next year. At its current price and prospective earnings, says Eisenberg, "Caesars is one of the most attractive, undervalued casino stocks around--with or without a takeover deal." A Caesars spokesman declined comment.GENE G. MARCIAL