Gaming Index

July 06, 2010 7:10 AM


During the month of June, the Applied Analysis Gaming Index (AAGI) reported modest growth, which was mostly the result of gains by two casino operators, Wynn Resorts and Las Vegas Sands.

While concerns about the national economic recovery persisted and challenges in the broader equity market continued, most casino operators ended the month about where they began it.

With no significant financial news coming from gaming operators and manufacturers during the month, expectations regarding second quarter financial reports remain relatively weak.

Another 30 to 45 days will reveal more on general market trends, including locals-oriented and destination-based casino companies.

The AAGI posted a composite score of 334.4 points by the close of June, representing a 0.5-percent increase from the preceding month (May).

Compared to the same period of 2009, the index was up 43.5 percent. The latest movement within the gaming sector outpaced the broader equity market as the S&P 500 posted a 3.7-percent decline during June (when computed on a similar basis).

On an annual basis, the S&P 500 was up 17.0 percent.

Las Vegas Sands (LVS) reported increasing demand for its stock as the daily average price in June jumped 11.1 percent from May.

Interest in the expanding gaming operator was partially fueled by the opening of Marina Bay Sands in Singapore. The new project likely contributed to a reported 30.3 percent rise in visitor volume in the region during May, while management remains bullish on the Singapore market and expected profitability.

Wynn Resorts, Ltd. (WYNN) was the only other gaming operator to post a month-to-month increase in valuation. WYNN maintains operations primarily in Las Vegas and Macau, two of the key markets in which LVS also competes.

Regional operators such as Boyd Gaming (BYD) and Pinnacle Entertainment (PNK) were harder hit during the month as broader economic conditions continue to affect their primary markets.

Late in the month, Boyd Gaming (BYD) announced plans to roll out its B Connected loyalty program to a nationwide audience, which will have its Vegas-based "Club Coast" cardholders converting to the new program with additional incentives. The expanded program likely provides an opportunity to gain members, and improve the company’s ability to cross-promote its properties to a broader audience.

From a gaming equipment manufacturer perspective, International Game Technology (IGT) sought to push out debt maturities with a $300 million issuance of notes due in 2020 (5.5 percent). Proceeds from the transaction are expected to pay down debt on IGT’s revolving credit line.

In other corporate news, MGM MIRAGE officially changed its name to MGM Resorts International (MGM). While the operations of the Las Vegas Strip gaming giant are expected to improve, according to commentary sourced to the Wall Street Journal, comments from Jim Murren suggest the second quarter bottom line should turn from red to black while occupancies at the new flagship property, Aria, are trending upward.