IGT shares fall following
Morgan Stanley downgrade

Apr 12, 2005 6:04 AM

Analysts of the country’s largest gaming companies may have differences of opinion but quite often the negative opinions seem to prevail. That was the case over the weekend with International Game Technology (IGT).

Initiating coverage of IGT, analysts at Legg Mason offered a "buy" rating on the shares whose value has dropped from a high in early January of $35 a share to Monday’s level of $25.95 a share.

Putting a damper on the share price was a research note distributed to Wall Street investors Monday morning by analysts at Morgan Stanley. Concerned about the prospects of declining interest by casinos in replacing their existing machines with a newer variety, the company cut its rating on IGT shares to "underweight" from "equal weight."

Also influencing the analysts was the distribution of so-called "participation games," those devices that are provided by IGT at little or no cost to the casino with the agreement that IGT would receive a percentage of the revenue from these machines. Typical of these would be the industry’s most popular gaming device, "Wheel of Fortune." It is the opinion of some observers that these machines are not generating the same interest among Native American casinos, such as those being operated in California, therefore the interest in "participation games" may be dwindling.

In a discussion of stock investments on the Fox Network Saturday, one individual suggested that with the price of IGT shares having fallen to such a low level it was now time to buy. However, another stock guru on the program disagreed, adding that he believed the share price would drop to the $20 level.

Colorado casino

"Over my dead body," is the way comments from Colorado Gov. Bill Owens were described following the offer by Native Americans of $1 billion to the state if given the opportunity to build a casino near the Denver airport.

"That’s OK," replied a representative of the Cheyenne-Arapaho Tribes, whose members were massacred in Sand Creek in 1864 and chased onto reservations throughout Oklahoma. "Time is one our side. He’ll (Owens) be gone in two years. We’ll just hold tight. We’re just going to keep this cooking warm and wait him out."

In order for the offer to be accepted, Colorado voters would have to approve gaming expansion in the state. However, voters have defeated gambling expansion plans seven times in recent years.

Sponsors believe the Denver casino would generate about $100 million annually for the tribes.

Earnings season

With the completion of the first fiscal quarter for many gaming companies on March 31, the industry has entered the so-called earnings season. Among the companies that have announced dates to release their earnings were:

MGM MIRAGE Inc. (MGG), Tuesday, April 19, at 8 a.m. PDT.

Caesars Entertainment Inc. (CZR), Thursday, April 21, at 5 a.m. PDT.

Station Casinos Inc. (STN), Wednesday, April 27, at 9 a.m. PDT.

Progressive Gaming International Corporation (PGIC), Wednesday, May 4, at 8 a.m. PDT.

Scientific Games Corporation (SGMS), on Thursday, May 5, at 1 p.m. PDT.

It’s dead

Efforts by Maryland Gov. Robert Ehrlich to have lawmakers pass his slot machine gaming bill have ended. In a radio broadcast on a Baltimore station, the governor said his plan was dead for the current year and won’t be revived until the 2006 legislative session.

Ehrlich called it "a crying shame. The leadership has told me they will not allow a slots referendum on the ballot with my name on the ballot at the same time. In essence, this means that slots are dead for two years."

The comments were made one day after Ehrlich’s private meeting with a gaming opponent who heads the Maryland House to see if there was a way to compromise on the pending legislation. Both the Senate and the House have passed bills approving slot machines but there are significant differences in the language of each bill. Without an agreement, the legislation will die for lack of action.

Difference of opinion

Nowhere is the current poker craze being felt greater than at Foxwoods Casino, a huge casino in Connecticut that is owned and operated by the Mashantucket Pequot Indian Tribe. They already have installed 81 tables, seating 810 players, in their poker room and still most players must wait an hour or longer before a poker seat becomes available.

Yet, the casino’s nearest competitor, the Moheagan Sun Resort, closed its poker room just when the craze was in its infancy 18 months ago and the operators have resisted the poker movement. They cite the profit figures. Instead of poker tables, they have slot machines and are satisfied that their numbers justify their decision.

Casinos that have returned to poker, some who closed their poker rooms years ago, say that although the profit factor from poker still doesn’t justify the space allotted, they feel that the activity has become an amenity such as boxing, concerts or big-name performers. Poker room operators say their guests are now taking rooms, eating at their restaurants and enjoying the other facilities being offered and the profit from these cannot be measured.

THE INSIDER: Anthony Williams, chief engineer for Arizona Charlie’s Decatur Casino, has been elected president of the Nevada Professional Facilities Managers Association.

MTR Gaming Group Inc. (MNTG) plans to acquire a 90% interest in Jackson Trotting Association, the company that owns Jackson Harness Raceway in Jackson, Mich.

Nevada gaming revenues rose 3.8% in February reaching $909.5 million, an all-time record for the month. Strip gaming revenues were up 4.05% to $462.7 million.

GTECH Holdings Corp. (GTK) announced that David J. Calabro, executive vice president and COO, will retire on May 15. His duties will be taken over by Bruce Turner, current CEO.

A bill to introduce slot machines at the state’s four racetracks was defeated in the New Hampshire Senate by vote of 18.6.

The New Orleans, La., City Council believes the installation of slot machines at the Fair Grounds Racetrack, owned by Churchill Downs Inc. (CHDN), violates the city charter. The Council plans to seek a court judgment to prevent the track from introducing slots.

The Borgata Hotel Casino & Spa in Atlantic City, co-owned by Boyd Gaming Corp. (BYD) and MGM MIRAGE Inc. (MGG), posted gross operating profits of $223.5 million in 2004. This easily topped all 12 casinos in Atlantic City.

The hopes of Canterbury Racetrack in Minnesota to expand its card room into a full-fledged casino with the installation of slot machines were dashed last week when a Senate committee killed a bill favoring the action by vote of 10.4. The track is owned by Canterbury Park Holding Corporation (ECP).