The Maryland Racing Commission is set to vote tomorrow on whether to approve the majority sale of Pimlico Race Course and Laurel Park to Magna Entertainment Corp., but some in the world of finance are unsure whether the Canadian firm is prepared to live up to its promises for the tracks.

Magna has been snapping up tracks across the country, often with grand plans to add slot machines as well as turn the venues into family destination spots - with concerts, restaurants or movies - that would attract even those who care not a whit for horse racing. But so far, much of the planning has been shelved.

A $100 million upgrade at Magna's Gulfstream Park in Florida, for instance, was put on indefinite hold in August.

"The feedback I get from those in the investment community has led us to believe that the company is more focused on the promise of slots at racetracks than they are on being horsemen," said equity analyst Daniel Davila of Hibernia Southcoast Capital in New Orleans. "The result of that is that - particularly the principal of the company [Chairman Frank Stronach] - the company has developed a knack of over-promising and under-delivering."

But another way to look at it, said analyst Jeff Rabin of Dundee Securities in Toronto, is that Magna has just had too many good, and unexpected, acquisition opportunities to pass up. He argues that it makes sense that Magna would put upgrades on hold in order to take advantage of opportunities - such as the Maryland tracks - that may never come around again.

"They have stretched themselves a little bit, but they have an incredibly strong balance sheet and very, very strong management," Rabin said. "The pace [of acquisitions] is a little bit different than they thought it would be, and the market's become, particularly in Maryland and Florida, very, very critical of their slowness to develop [the tracks].

"But they are putting the money where they will get the best return on their investment."

The publicly held Magna reported a net loss for the third quarter, which ended Sept. 30, of $9.7 million, or 9 cents a share, on revenue of $65.4 million. That compares with a loss of $6.2 million - 7 cents a share - posted for last year's third quarter on revenue of $65.8 million.

In a secondary offering in April, the company sold 23 million shares and raised net proceeds of $142 million.

As of the end of September, it reported $118 million in cash and cash equivalents vs. $43 million at the end of September 2001.

"Our financial health is just fine, thank you very much, and will continue to get stronger," said Jim McAlpine, president and chief executive of Magna Entertainment. "As of Sept. 30, we had shareholder equity of $730 million and long-term debt of $59 million. If you compared that to some of our competitors, either in horse racing or other gaming competitors in Las Vegas, that relationship between debt and equity is the strongest out there."

Millions for upgrades

He also said that Magna has spent many millions on upgrades at its facilities, even if some of its plans are still incomplete.

Magna's stock price reached a 52-week high of $9.95 in February, then fell to a low of $3.45 in August. It closed down 4 cents yesterday at $6.44. Magna's shares are controlled by Magna International Inc., one of the world's leading makers of auto parts.

Now the largest racetrack operator in North America, Magna has purchased 11 tracks in the past four years, including Santa Anita Park in California in 1998 and Lone Star Park in Texas this year.

A sale of Flamboro Downs in Ontario is pending.

Davila, the analyst, said Magna's plan of boosting profit through slots and off-track betting, including over the Internet, is "not altogether inappropriate" and that jazzing up the tracks to include entertainment to reach wider audiences "makes perfect sense."

"I think it's a very intelligent thing to do; owners are indifferent as to which register they take cash out of," Davila said. "They have all these grandiose plans, and where that leads you to is the next logical question: How do they pay for it? That's one of the questions still left in the investment community."

McAlpine said Magna won't have to pay for it: The company plans to work with retail entertainment developers who will come up with the capital for the projects and who would sign 60-year to 70-year leases.

"We'd get annual rent and we'd also get people infected with the thrill of horse racing and [wagering]," McAlpine said.

Davila said even though he has some reservations about the company making all its plans come to fruition, Magna and its executives "will look like geniuses" if they can get slots at even one track and that its earnings would likely double.

'Right candidate won'

And with Robert L. Ehrlich Jr. - a strong proponent of slots - now the governor-elect of Maryland, those prospects are even greater.

"The right candidate won in Maryland," Davila said. "The [Kathleen] Kennedy Townsend loss was an upset, to say the least, but it was good for anybody owning a racetrack in Maryland."

For his part, McAlpine wasn't giving odds on his company's chances for success tomorrow when the Racing Commission votes.

"I don't handicap politics," he said. "I have enough trouble with horses."