Merrill Keeps 'Buy' on Argosy Gaming

Analyst David Anders sees room for an earnings surprise for the casino operator

Merrill Lynch keeps buy on Argosy Gaming (AGY ).

Analyst David Anders says performance at the Lawrenceburg riverboat casino in January (gaming revenue rose 17%) ran well above his estimates, and he thinks the trend continued through February. For 2004, he had modeled in 2% same-casino revenue growth, which now is revised upward to 6%.

In addition, Anders says the newly remodeled and expanded Kansas City riverboat has been running ahead of his estimates. He raised the $2.25 2004 earnings per share estimate to $2.27, and uppped the $2.50 2005 estimate to $2.60 to reflect performance of these two properties. He also raised the $32 target to $39, which is based on an enterprise value-to-205 EBITDA multiple of just under 6.5.

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