Penn National: No robust recovery in Las Vegas

The M Resort in Henderson.

Penn National Gaming, owner of the M Resort in Henderson, on Thursday reported a smaller third quarter profit on lower revenue amid flat conditions in the Las Vegas area and elsewhere.

"We continue to show improved margins at the M given a very flat revenue environment there," President Tim Wilmott told analysts on a conference call. "As we look into 2013, that’s not going to change at all. We don’t see any kind of robust recovery in Las Vegas right now. Construction continues to move very slowly there, and general economic conditions for 2013 are going to be very similar to what we saw in 2011 and 2012."

He added that the company is "very pleased with the $230 million investment we’ve made at the M."

Penn National, which was outbid for the stalled Fontainebleau resort on the Las Vegas Strip, acquired the $1 billion M Resort last year by buying $860 million of its distressed debt for $230.5 million.

"We continue to show improved margins in the business quarter after quarter, and we think there is further upside to that story going into 2013," Wilmott said. "It's all going to be dependent upon getting some sense that the market out there, the Las Vegas locals market, is on the rebound, which we don't predict for 2013."

"There's always the opportunity as we continue to grow that business for an additional hotel tower, but that's out in the future right now," he said. "We're very pleased with the performance of the 390 rooms today. They're showing a very strong occupancy. That could always be better. It’s obviously dependent on group and convention business, and that continues to be somewhat bumping along both locally and on the Strip right now."

Penn National, based near Reading, Pa., said companywide third quarter net revenue came in at $707 million, down from $711 million in last year’s third quarter amid flat spending by customers. Net income of $46.5 million, or 44 cents a share, was down from $70.8 million, or 66 cents.

The profit fell as general and administrative costs, including lobbying costs, increased $28.7 million as Penn National continued with a growth spurt involving new, purchased and proposed casinos.

Penn National operates 28 gaming properties around the country including newly-opened casinos in Columbus and Toledo, Ohio. It’s finalizing the purchase of the Harrah’s casino in St. Louis from Caesars Entertainment and is competing to develop a casino resort in Springfield, Mass.

On top of that, Penn National is looking at expansion opportunities in the Canadian province of Ontario, but not in Toronto where a multibillion-dollar project may be developed. It’s also lobbying for the expansion of gaming in Texas.

In Maryland, Penn National is fighting with MGM Resorts International as the companies have taken different sides on a ballot measure that would allow for table games and the potential development of a casino in National Harbor – a project Penn says would threaten its Rosecroft Raceway.

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