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Wall Street Bets on Isle of Capri Casinos

Comprehensive cost-cutting measures and being located outside the troubled Las Vegas and Atlantic City markets is making Isle of Capri a safer bet among investors despite continued revenue loss at its casinos. The regional gambling operator, based in St. Louis, Mo., is sporting the best returns among its casino peers, with its share price more than tripling since the beginning of the year.

“Although there is broad pressure on consumer spending, smaller regional markets have held up better than Las Vegas and Atlantic City during the recession,” said Michael Paladino, senior director of gaming at Fitch Ratings. 

Missouri recently eased gaming regulations, which helped Isle’s relative property performance compared with some of the larger gaming companies with greater exposure to Las Vegas and Atlantic City, Paladino said. In general, regional casinos in America’s heartland have stabilized because they aren’t as vulnerable to weakness in nongaming areas such as lodging, fine dining and air travel. 

MGM Mirage and the Las Vegas Sands Corp. had been dogged by concerns surrounding liquidity as well as a brutal business environment in Sin City which is battling rising unemployment and home foreclosures. Amid signs of industry stabilization and the removal of bankruptcy fears, MGM Mirage is up 260% from its 52-week low of $1.81. However, the company’s share price is still down about 52% from the beginning of the year.  Meanwhile, Las Vegas Sands is up roughly 36% on the year to about $8. 

Keith Foley, a gaming analyst at Moody’s Investors Service, said while investors are getting more bullish because the pace of declines has slowed, Isle of Capri is still grappling with “declines on a revenue basis with few exceptions across the board,” at the casino properties. 

“The top line is still struggling,” he said. Foley noted, however, that the management team has made extensive strides at controlling costs. “It’s still hard to say that (demand) trends have stabilized across the U.S.” 

Isle of Capri, which owns 17 properties, announced last week that it swung to a fiscal fourth-quarter profit on a $57.7 million gain from the early extinguishment of debt. It was the company’s second straight quarter of profit after more than two years of losses – a $95.2 million Hurricane Katrina insurance claim inflated its fiscal third-quarter results. 

The debt-laden casino operator has been cutting costs and consolidating its portfolio into two brands as it concentrates on the U.S. The company has left the U.K. market and plans to stop operating its property in the Bahamas, where a sharp decline in tourism in late May shuttered a Four Seasons Hotels and Resorts BV property. 

Fitch’s Paladino said the company has made strong efforts to improve their financial position, which has improved sentiment on the company. They have “one of the top cost-focused management teams in the industry,” he said. “Their overall credit profile is pretty attractive.”  Paladino also said Isle has no debt maturities until 2012 and very minimal capital spending plans beyond maintenance.

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Sex Wanes in Las Vegas

Sex to Las Vegas is like the motherhood and apple pie for puritanical cities:  it provides the embodiment and very essence of Sin City’s worldwide allure and attraction.  Sex drives Las Vegas.  Or does it? sex

The sad but naked truth is Las Vegas sex convention dominance is being challenged.  Witness the results this year from the annual sex poster child- the AVN Adult Entertainment Expo at the Sands Expo and Convention Center that occurred on January 9 through 11.  Although similar smaller adult conventions take place, the Las Vegas AVN convention has always been the ‘Big Momma’- by and far the reigning ruler of THE largest event for the adult entertainment industry worldwide.  

Thousands of sex workers make their annual pilgrimage to the Mecca of Sin.  Last year event organizers reported attendance of approximately 12,000 sex industry workers, 17,000 fans, and 1,300 of the media.  That provides a whole lot of legalized peeking-and-peeping.  

But this year, only 250 exhibitors took the gamble to show up and showcase their latest and greatest in adult entertainment products and toys.  That’s down about 18 percent, according to expo spokesman Sean Devlin.  

The only saving grace is that fan and media interest appeared strong this year.  Many attendees grabbed the rare opportunity to see in one place the adult industry’s top stars and try to gain their “secrets” by attending fan seminars, events, and taking advantage of a plethora of up-close and personal networking opportunities. 

But looking doesn’t keep the lights on.  

The toxic U.S. economy has siphoned off billions of dollars in profits from the normally “healthy” sex business.   Though estimates vary, nationally the sex industry is thought to now generate about $13 billion annually.  That’s down from $18 billion three years ago, according to top industry figures.

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