Applied Analysis Index: Gaming Stocks Head Up

3 October 2006

LAS VEGAS, Nevada -- Gaming stocks ended a three-month downturn in their average daily prices during September, mainly due to greater consumer confidence nationally and a record-breaking gaming win by Nevada casinos in July.

Analysts pointed to falling oil prices and an overall rebound in the assuredness investors have found in the economy.

An index compiled by Applied Analysis, a Las Vegas-based financial consulting firm, showed the average daily stock prices of some of the gaming industry's largest companies climbing a collective 4 percent in September. The index closed the month at 349.12, up 12.07 points from August.

"There wasn't a lot of major news during the month, but there seemed to be a renewed interest in the gaming sector," Applied Analysis partner Brian Gordon said Friday.

Bill Lerner, a Deutsche Bank gaming analyst, said the rise in gaming stock prices reflected the overall view that the economy has improved. Oil prices dropped, interest rates stabilized and many gaming markets have had strong monthly revenue increases, he said.

"There's a little more confidence and the gaming consumer has been pretty resilient," Lerner said. "When you see how the markets are reporting gaming revenue increases, that gives the investor a little more confidence."

Gordon added that profit-taking by investors had slowed while stock prices fell. But the climbing values could renew interest in profit-taking, he said.

"Investor profit-taking contributed to declines in valuation within the sector in recent months," Gordon said. "However, recent stock performances reflected positive expectations for gaming operators and manufacturers as value and growth opportunities remain."

Among the casino operators tracked in the index, Harrah's Entertainment had an average stock price of $64.51 in September, a jump of 5.6 percent compared to August. Gordon said the casino company benefited by this week's announcement in Pennsylvania that state regulators had approved the use of slot machines at racetracks, including the company's track in Chester, which is just outside of Philadelphia.

"Gross gaming revenues in the state could reach into the billions," Gordon said.

He added that Harrah's Entertainment's plans to acquire London Clubs International would give the company instant access into a market undergoing regulatory changes.

MGM Mirage, which began construction this summer on its $7 billion Project CityCenter on the Strip, had its average daily stock price in September finish at $37.46, an increase of 4.8 percent over August.

On the Strip, gaming revenues climbed 10 percent in July and 11 percent in Clark County, the state's most recent data show. Those results helped Boyd Gaming Corp. and Station Casinos post modest gains in their average daily stock prices.

Meanwhile, the opening of Wynn Resorts Ltd.'s $1 billion casino in Macau, China, may have caused a drop in the company's month-over-month average daily stock price, a trend that has followed major property openings over the past few years, Gordon said.

Wynn Resorts' stock price, which averaged $72.12 during September, had a run-up in August in anticipation in the casino's opening. September's price was a 1.2 percent drop over August.

Las Vegas Sands Corp., which has a large casino in Macau and is building a $2.4 billion replica of its Venetian hotel-casino in the Chinese community, had its average daily stock price climb 4.6 percent in September.

In manufacturing, the three slot machine makers tracked by Applied Analysis showed marked increases, mainly due to the market expansion news in Pennsylvania.

International Game Technology had a 4.7 percent increase in comparing its September stock price of $39.41 with August. Meanwhile, WMS Industries had 9 percent jump.

Bally Technologies, which announced several product placements in September, had its stock price climb on a daily average to $16.75, up almost 7 percent compared with August.

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