Missouri choice sage or silly for Pinnacle?

By the end of the year, Pinnacle Entertainment will know whether its decision to abandon a third gaming license in Missouri was a smart wager or a bad beat on the river card.

The Las Vegas-based regional casino operator folded its permit for the President in downtown St. Louis in June when it closed the aging riverboat. Three months earlier, Pinnacle opened a $380 million casino in suburban St. Louis.

Pinnacle bought the President out of bankruptcy for $46 million in 2006 to protect its flagship $407 million Lumiere Place, which opened a year later. The move kept other casino operators from invading Lumiere's space while the project was in development.

Pinnacle's balance sheet was damaged by the economy and the company retrenched. Management canceled development plans in Atlantic City and Lake Charles, La., to concentrate on operating its casinos in four states.

In August, Pinnacle's gaming revenues from Missouri increased 54 percent. CRT Capital Group gaming analyst Steven Ruggiero thought the company's stock price should be at least $3 or $4 higher than its current value.

But his assessment could change if the President's license stays in St. Louis.

Missouri liberalized gaming regulations in 2008, removing loss limits and increasing wagering minimums. In 2009, state gaming revenues jumped 2.9 percent when most other states reported declines.

The President's license is the 13th and last available in Missouri. It naturally attracted a wealth of suitors.

Missouri regulators are considering four proposals. Much to Pinnacle's dismay, two of the projects could keep the license in St. Louis, adding competition to the market.

Quietly, Pinnacle is rooting for regional rival Isle of Capri Casinos to take the license 117 miles south to Cape Girardeau, or for Las Vegas-based Paragon Gaming to build a casino 250 miles west in Kansas City.

Both locations have hurdles.

A citywide vote on gaming in Cape Girardeau is scheduled for Nov. 2, which could shelve the project. Kansas City is populated with casinos operated by Isle of Capri, Harrah's Entertainment, Penn National Gaming and Ameristar Casinos. A casino is under construction across the Missouri River in Wyandotte County, Kan.

The two St. Louis projects have issues, too. Environmentalists oppose plans in the Spanish Lake region, while a North St. Louis venture could lead to market saturation. St. Louis already had six casinos.

"It would be a negative if another casino is allowed in St. Louis," Janney Montgomery Scott gaming analyst Brian McGill said.

Howard Stutz's Inside Gaming column appears Sundays. He can be reached at hstutz@reviewjournal.com or 702-477-3871. He blogs at lvrj.com/blogs/stutz.