Key indicators positive for slot makers

Jan 21, 2009 7:43 PM
by David Stratton |

As the commercial casino industry struggles with declining profits, slot manufacturers and other suppliers are showing signs of an economic rebound in 2009.

As of December 2008, the AGEM (Association of Gaming Equipment Manufacturers) Index reached a value of 79.96, a 12.1 percent increase from the 71.33 reported for November.

The index is based on the stock prices of 16 global gaming suppliers, 13 of which are based in the U.S. and listed on the NYSE, Nasdaq or AMEX.

While the index was down significantly during 2008, December's 8.6 point increase was the largest monthly increase since August 2007.

The positive results haven't gone unnoticed on Wall Street.

Oppenheimer & Co. has issued "Outperform" ratings for Bally Technologies and WMS Gaming, and a "Perform" rating for industry leader International Gaming Technology (IGT).

"Key elements of the gaming equipment suppliers' business is the installed base of leased and participation games, as well as the systems business, both of which we believe are undervalued," said Oppenheimer analyst David Katz.

Katz added that Oppenheimer's forecast is based on expected sales of 87,000 units in 2009, of which 31,000 are earmarked for new casinos opening and 56,000 to replace old or outdated machines.

Companies that will generate the bulk of the sales are IGT, Bally and WMS. Based on the estimates, Oppenheimer forecasts a 6 percent earnings increase for IGT over the next 12 months, and earnings increases of 15 percent and 16 percent for Bally and WMS, respectively.

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