Great Canadian Gaming to miss analyst profit predictions: normal variations - Monday 17th of October 2005

Great Canadian Gaming Corp. said its third-quarter profits will come up short of market expectations, news that sent shares of the company for a wild ride Friday.

The company attributed the miss to factors that "are of a short-term nature and represent normal variations in delivery timing, having regard to the scope and complexity of projects being undertaken."

Twitchy investors knocked down its stock (TSX:GCD) as low as $13.40, down $1.98, at the open. But by the close, the shares - above $19 less than a month ago - were down just 58 cents at $14.80, a decline of about four per cent.

Great Canadian Gaming, which intends to release third-quarter results Nov. 7, said it estimates earnings per share for the July-September period at between 11 and 13 cents per share.

Three analysts reporting to Thomson Financial had on average expected 16 cents per share, with a range between 12 and 21 cents.

Great Canadian Gaming said the analyst estimates "may not have reflected the revised timing of certain key deliverables and other factors."

These include delayed regulatory approval of the acquisition of the Georgian Downs standardbred track in Barrie, Ont.; rising costs at the expansion of the Coquitlam, B.C, casino, budgeted at $90 million and now expected to be complete in November; and stock dilution caused by the issue of 3.9 million shares related to the purchase of Flamboro Downs near Hamilton.

Analyst Robert Winslow of Wellington West Capital Markets lowered his rating on the companys shares from a "strong buy" to market perform. He also cut his price target on the company from $23 to $17.

"We previously acknowledged the risk of a high growth strategy, but now suggest we are seeing the challenges of an aggressive expansion plan," Winslow wrote in a note to clients.

In lowering his price target, Winslow wrote that he was removing the trust version upside and suggested that signs of integration success was important before investor confidence would be regained.

"We and the investment community will likely need to see at least two quarters of solid results before we regain confidence in this story," Winslow wrote.

Earlier this year, Great Canadian Gaming announced plans to buy the Flamboro Downs raceway in Ontario from Magna Entertainment Corp.

The company said last week it is still waiting for approval of the deal from the Ontario Racing Commission.

Flamboro Downs, on almost a square kilometre of land about 70 kilometres from Toronto, provides year-round harness racing, simulcast wagering and 752 slot machines.

The acquisition expands an eastward push which has included a deal in April to buy Georgian Downs, a standardbred complex north of Toronto, and the purchase in May of casinos in Halifax and Sydney, N.S.

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