Gaming stock index continues upswing in May

Jun 3, 2009 7:43 PM
by GT Staff |

For the second straight month, the Applied Analysis Gaming Index (AAGI) posted a monthly increase, reaching a value of 240.04 by the close of May 2009.

The latest valuation of gaming industry stocks represented a 9.3-percent increase from April 2009, or a 20.5-point jump.

Compared to the same month last year, aggregate valuations remain down 50.6 percent.

The uptick during the past month outpaced the broader market as the S&P 500 was up a more modest 6.4 percent (when computed on a similar basis).

As Wall Street concerns eased during the month, stock prices were rewarded. Several factors contributed to increasing performance within the gaming sector, including:

• market expectations that an end to the current recession is in sight;

• remarks by major operators that demand indicator declines are decelerating;

• balance sheet stability from recent capital raises; and

• moderating national consumer confidence levels.

The month-to-month performances of all gaming operators and equipment manufacturers in the index were positive as double-digit gains were posted by AAGI contributors.

Top performances were turned in by: Las Vegas Sands (LVS) up 79.2 percent; MGM MIRAGE (MGM) up 68.4 percent; and Boyd Gaming (BYD) up 65.6 percent.

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Also during the month, MGM MIRAGE (MGM) successfully completed its $2.5 billion capital raise. The company issued $1.5 billion in secured notes and $1.0 billion of common stock. The capital raise also triggered adjustments to its debt covenants, which appear to have shored up balance sheet and compliance issues in the near term.

Las Vegas Sands (LVS) witnessed its valuation reach well beyond the low of $1.38 reported in mid-March 2009. During May, LVS opened the Sands Casino Resort Bethlehem, which is situated on the former site of the historic Bethlehem Steel plant and located approximately one hour from Philadelphia and an hour and a half from New York City. While LVS opened its latest property, media reports suggested the company may be interested in spinning off its Macau assets through an initial public offering (IPO). LVS did not confirm the story, but it would appear all options are being considered to cure its heavy debt load.

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