Larry Haverty of Gabelli Asset Management won big at the dice tables in Las Vegas a few weeks ago. But a smarter play, he says, is Aztar ( AZR), operator of Tropicana Casino & Hotel in Vegas and Atlantic City. The Street is underwhelmed by Aztar's prospects because of fierce rivals. But Haverty thinks it may soon be in play. Aztar, which also owns a casino in Laughlin, Nev., and two riverboats in Missouri and Indiana, "is an attractive target for the likes of Station Casinos (STN) and Boyd Gaming (BYD)," says Haverty. Aztar has 34 underutilized acres on the Strip -- on part of which the Tropicana stands, says Haverty. The site, he adds, could easily hold another hotel. Aztar shares rose from 26 in early May to 31.53 on June 8, thanks to speculation that Aztar will have to develop the property -- or sell. Haverty sees the stock at 40 in a year. "A decision about plans for the site could trigger a burst of investor excitement," notes Value Line's (VALU) George Rho, who otherwise isn't bullish on Aztar. Earnings, he points out, have been sluggish since 2002, but he sees a pickup in 2006. Rho forecasts earnings of $1.45 a share in 2005 on sales of $910 million, and $1.80 in 2006 on $945 million. Boyd's Rob Stillwell says the rumor is interesting but he won't discuss it. Aztar's Joe Cole declined comment; Station didn't return calls.
Note: Unless otherwise noted, neither the sources cited in Inside Wall Street nor their firms hold positions in the stocks under discussion. Similarly, they have no investment banking or other financial relationships with them.
By Gene G. Marcial