February fade for IGT, Sands drags down index

LAS VEGAS, Nevada -- The stock performance of two gaming companies cast a shadow over the sector in February.

The average daily stock prices of casino operator Las Vegas Sands Corp. and slot maker International Game Technology slipped in the month from January, an index compiled by Applied Analysis, a Las Vegas-based financial consultant shows. Because of the weight the two companies have on the nine-company chart, the index fell 7.6 points, its first monthly loss since August.

Brian Gordon, a partner in Applied Analysis, said Wednesday that Las Vegas Sands, which has a market capitalization of $30.7 billion, the highest of any company in the index, had a significant effect on the rankings.

In addition, the stock prices of two casino operators now involved in high-profile private equity buyouts, Harrah's Entertainment and Station Casinos, aren't expected to move much in any direction during 2007 while the companies go through the process of being taken private, he said.

Gordon said shares of Las Vegas Sands hit an all-time high of $105.70 on Feb. 1. But the price collapsed over time, dropping to $83.84 on Tuesday when stock markets plunged. During the month, shares of Las Vegas Sands traded at an average daily price of $94.89, down 6.33 percent from January.

Las Vegas Sands, which operates The Venetian and the Sands Macau in China, reported a shift in operating performances during the fourth quarter ended Dec. 31, with a greater percentage of the company's revenues coming from its Las Vegas casino rather the Sands Macau.

"Profit-taking also played a role in the recent decline as valuation reached an all-time high," Gordon said.

According to the Applied Analysis report, economic indicators for 2006 were released during February and pointed toward a vibrant tourism market. Gaming win in Clark County during the year jumped 9.5 percent over 2005 while visitor volume had a marginal increase of less than 1 percent.

"Fundamentals within the tourism and locals gaming segments are expected to remain relatively stable through the first half of 2007," Gordon said.

Reno-based IGT, the gaming industry's largest slot maker, had its average daily stock price tumble 6.8 percent in February to $43.30. Gordon said that investor speculation about the rate of domestic and international slot machine expansion is an underlying concern within the manufacturing sector.

"Marketwide downturns late in the month impacted demand for (IGT)," Gordon said.

Goldman Sachs gaming analyst Steven Kent, in a note to investors following a meeting with IGT executives, said certain catalysts, such as new gaming legislation, could boost IGT's shares.

In the short-term, however, Kent believes the company's shares will remain in their current trading range.

"Despite our concerns with the short-term domestic market, we continue to be impressed with IGT's ability to swing from growth vine-to-vine," Kent said. "The technological diversity allows it to shift gears and focus on new areas of gaming growth, like South Africa, Mexico, Japan and Oklahoma, when other areas are in a slower period."

Applied Analysis said shares of MGM Mirage jumped more than 8 percent in their average daily stock price during February based on the company's strong fourth-quarter earnings statement.

Meanwhile, the shares of slot maker Bally Technologies jumped 10.5 percent in February, fueled by Wall Street speculation late in the month that it was in merger talks with Australian rival Aristocrat Technologies. However, Stiffel Nicolaus gaming analyst Steven Wieczynski said while a merger would make sense, Bally's continuing legal battles with IGT are a roadblock to any consolidation talks.

AVERAGE DAILY STOCK PRICE

FEB. 2007

JAN. 2007

PERCENT CHANGE

MGM Mirage

$71.30

$65.88

8.23 percent

Harrah's Entertainment

$84.97

$83.27

2.04 percent

Las Vegas Sands Corp.

$94.89

$101.30

-6.33 percent

Wynn Resorts Ltd.

$105.67

$104.03

1.58 percent

Boyd Gaming Corp.

$47.85

$47.10

1.59 percent

Station Casinos

$83.69

$81.77

2.35 percent

International Game Technology

$43.30

$46.47

-6.83 percent

Wms Industries

$38.38

$38.51

-0.32 percent

Bally Technologies

$20.51

$18.56

10.5 percent

SOURCE: APPLIED ANALYSIS