Ahead of the Bell: Ameristar Casino upgraded

Analyst upgrades Ameristar Casino on lower capital spending, strong Black Hawk property

• On 7:26 am EST, Monday November 9, 2009

NEW YORK (AP) -- An analyst on Monday upgraded Ameristar Casinos Inc. on lower capital spending and probable market share gain from its Black Hawk casino property in Colorado.

Janney Capital Markets analyst Brian McGill said in a note to investors that Ameristar does not have any future capital projects, so free cash flow is likely to be strong in 2010 and 2011.

Free cash flow is the cash that a company makes minus the money required to maintain or expand its asset base. It is seen as a measure of a company's ability to generate cash and profit.

McGill expects extra cash will be used to pay down debt.

Meanwhile, Ameristar Casino's Black Hawk casino in Black Hawk, Colo., will probably take market share in the area, he said.

"We think Ameristar's focus on cash flow generation, rather than new markets or property expansions, makes it one of the safest names to own among the casino operators," McGill wrote.

He upgraded the company to "Buy" from "Neutral" and raised his price target to $20 from $18.

Last week, Ameristar, based in Las Vegas, said its profit edged up in the third quarter, helped by lower operating expenses, a lower tax rate and an uptick in room revenue.