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Howard Stutz


Gaming stocks gain for fourth straight month

1 May 2012

By Howard Stutz
It's early in the quarterly earnings season, but initial reports have given a boost to the gaming sector.

For the fourth consecutive month, gaming stocks - on a whole - gained in value, according to Las Vegas-based financial consultant Applied Analysis, which charts the average daily stock prices for eight casino operators and four gaming equipment providers for its monthly Gaming Index.

Gaming operators posted mixed results; shares of Caesars Entertainment Corp. traded up more than 15 percent on an average daily basis during the month while shares of Ameristar Casinos took the largest tumble, off 7 percent in April.

All four gaming equipment makers had increased stock value in April, led by WMS Industries, which saw its average daily share price climb almost 7 percent.

Applied Analysis principal Brian Gordon said in a report to the firm's clients that positive first-quarter earnings reports suggest that market fundamentals are improving and investor expectations are on an upswing.

Last week, Las Vegas Sands Corp. told investors the company had net revenues of $2.76 billion and cash flow of more than $1 billion in the first quarter. Roughly 83 percent of the company's revenues came from its holdings in Macau and Singapore.

Meanwhile, Boyd Gaming Corp. and International Game Technology also released positive quarterly earnings.

"Strong growth in relatively new markets proved positive for the industry while demand for slot machines appears to be resuming," Gordon said.

The index, which is based on some 300 different market variables including average daily stock price, gained 8.24 points to reach 497.24.

This week, quarterly earnings are expected to be released by gaming giants MGM Resorts International and Caesars Entertainment Corp., and by regional casino operators Ameristar Casinos and Pinnacle Entertainment.

Gaming manufacturers are capturing Wall Street's interest after years of sagging slot machine and gambling equipment sales. Casinos were reluctant to update gaming floors while the industry battled through the recession.

Interest has also turned toward Internet gaming potential.

Several slot machine manufacturers, including IGT, Bally Technologies and WMS, have initiatives for Internet gaming in which the companies would provide content to casino websites. IGT is already providing content in Europe through its acquisition last year of Swedish online gaming company Entraction.

Roth Capital Partners gaming analyst Todd Eilers said Shuffle Master Inc., which saw its average daily stock price jump by 2 percent in April, is also hoping to crack the Internet gaming market through its recent acquisition of the Ongame poker network.

Eilers said Shuffle Master is close to announcing several online poker contracts with U.S. casino operators. The deals could position Shuffle Master to capitalize if Congress legalizes Internet poker.

"At this point we believe federal legislation is unlikely," Eilers said. "We also believe the pace of new U.S. jurisdictions legalizing online poker will be slow with only Nevada and possibly New Jersey introducing by 2013."

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