Station Casinos

(STN) - Get Report

deserves a higher stock price because of its coming Red Rocks casino and Native American contracts, contends Harris Nesbitt analyst Jeffrey Logsdon.

The analyst Monday lifted his nine-to-15-month price target on Station stock to $63 from $51. Recently, shares fell 71 cents, or 1.4%, to $48.19, after rising as high as $49.50 very early in the session. The 52-week high is $50.96.

"Management's recent comments lend better visibility to projects and Native American management contracts coming online through 2007, which has led us to raise our forecast for EBITDA" (earnings before interest, taxes, depreciation and amortization) for 2006 and beyond, Logsdon wrote in a research note. "We note that we still fall well within company guidance for 2006 and 2007, a mark the company has consistently exceeded." (Harris Nesbitt does not do business with Station and does not seek to do business with Station.)

Logsdon left his earnings forecasts unchanged for the casino company. Even so, he contends Station deserves a higher multiple than other gaming companies. "Simply applying a peer-group multiple to next year's EBITDA captures neither the value of Red Rocks Station ... nor the value of four Native American management contracts in 2006-2007." Station manages the casinos for the tribes and receives hefty fees in what has become a rich source of revenue in the industry.

Logsdon also said Station's EPS should reflect "undeveloped land worth at least $4 per share."

He did establish a 2006 annual EPS estimate of $2.75, implying 20% growth from his 2005 estimate of $2.30.

The company plans to report third-quarter results Oct. 19. The consensus Wall Street estimate is for earnings of 44 cents a share.