Boyd's Shares Bounce Back Up

6 January 2006

LAS VEGAS -- With two days to absorb details of Boyd Gaming Corp.'s proposed $4 billion Echelon Place, mollified Wall Street investors Thursday embraced the company's plans for the new resort.

Shares in Boyd closed Thursday at $47.33, up $1.24, or 2.7 percent, on 1.2 million shares traded, double normal volume.

On Wednesday, Boyd shares had dropped to $46.09, down $2.31, or 4.8 percent, on 2.3 million shares traded.

Bear Stearns analyst Joe Greff said investors were unnerved by the scale and price of the project, which was well above the expected $2 billion.

The self-contained, integrated resort is planned for the 63-acre site of the Stardust on the north end of the Strip. It will include 5,300 hotel rooms, 1 million square feet of meeting and convention space, 350,000 square feet of retail stores, and a 140,000-square-foot casino.

Brian Gordon, a partner in the Las Vegas-based financial consultant Applied Analysis, said such metro resorts, of which Echelon Place is the first, are the wave of the future for Las Vegas.

Analysts said this metro resort differs from MGM Mirage's $6 billion Project CityCenter because it includes no residential component.

"We're talking about a self-contained destination (resort) with very high densities that will be the new standard for Strip developments," Gordon said.

He said Echelon Place is similar in density and scope to The Venetian and Wynn Las Vegas as they are being expanded, except that Boyd Gaming's project is being developed "on a clean slate" and in a single phase.

The clean slate lets developers plan greater density and integrate all elements of the development, unlike predecessors to Echelon Place in Las Vegas, Gordon said.

Boyd Gaming spokesman Rob Stillwell said innovation, including Boyd's Echelon Place, generates jitters.

"If we weren't doing anything new, there wouldn't be any uncertainty or reason for concern," he said.

The initial negative reaction among investors to Boyd Gaming's Echelon Place was to the massive scope of the project and the development and financing challenges it could pose, Steve Ruggerio, gaming analyst with CRT Capital Group, said.

However, after a day of company briefings and Wall Street analyses, investors felt better Thursday, he said.

Ruggerio said earlier announcements in 1990 to build the Stardust tower and in 1999 to build the Borgata in Atlantic City generated similar jitters among investors.

In these cases, however, Wall Street came to understand that Boyd had the leadership skills, financing capacity, partners and customer base to make the projects work, he said.

"With Echelon, analysts first questioned whether it could work," Ruggerio said. "But once they looked at the company's capacity, financing and partner participation, they started coming to the conclusion it will work."


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