Despite slowdown, investors continue faith in IGT

October 17, 2001 2:19 AM
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Investors continued to give strong support to International Game Technology (IGT), the country’ largest manufacturer of slot machines, last week boosting the company’s share price to $49.40.

This was substantially higher than the $38.10 per share price seen shortly after the Sept. 11 terrorist attacks.

The increase was consistent with the rationale expressed by Robin Farley, gaming analyst for UBS Warburg, in a research note. She lowered her earnings per share figure for fiscal 2001 from $2.80 to $2.77 but suggested that the company would hold better than casino operators.

“In terms of gaming operations, a slowdown in gaming revenue levels will affect IGT’s share of play from progressive units. However, IGT is better positioned than operators are because it shares in the revenues but not the expenses of a gaming operation,” she wrote.

Her references were to the company’s so-called participation games whereby a portion of each day’s revenue is shared by the casino operators with the machine manufacturer. “Overall play” wrote Farley, “was back to 94% of normal levels by last week.”

Shares closed Monday at $49.08, down $0.32 for the day.

Rising, in concert with IGT, was the share price of Anchor Gaming (SLOT), the company that has agreed to merge with its joint venture partner. Anchor Gaming closed Friday at $49.70, an increase of almost 40% over its post-attack low of $35.88.

The share prices are important because IGT and Anchor set a so-called collar of $50 a share for IGT’s stock in the merger. Farley explained that in her opinion “that collar was to protect Anchor from a change in IGT’s business, not a change in the overall U.S. market. We believe the reasons for going ahead with the merger are still intact ”” Anchor will get IGT’s capital and IGT will bring the joint venture in house.”

Improved earnings

Despite the economic slowdown and the problems caused by the attack on America, Boyd Gaming Corporation reported earnings of $0.09 a share, a 29% increase over the $0.07 earned in the same period last year.

Diversification was given as the reason the company held up so well during the period since its Central Division felt almost no impact from the Sept. 11 problems, as opposed to the properties in Las Vegas.

Record revenues were posted by the company’s Par-A Dice facility in Illinois, the Treasure Chest property in Louisiana and Blue Chip casino in Indiana. Also showing improvement was Sam’s Town in Las Vegas where the revenues jumped to $33.2 million from $31.7 million.

Showing a greater impact from the problems that followed last month’s tragedy was the Stardust Hotel/Casino on the Las Vegas Strip. Revenue was at $34.4 million, down from $36 million.

The company said it was looking forward to the future when by year end they hoped to have slot machines operating at Delta Downs racetrack in Louisiana. And, in 2003, they hoped to be operating, in conjunction with its 50% partner, The Borgata, the first destination resort to be built in Atlantic City.

Overvalued?

Is MGM MIRAGE (Inc.) share price overvalued at its present level? That was the question posed Monday by Barron’s Mike Santoli in an interview with CNBC.

Santoli said that even though current share price of $24 is down substantially from its 52-week high, the company appears headed for hard times and probably will not meet its previous earnings this year or even next year.

He said his Barron’s associates believe that since MGM MIRAGE has its principal properties on the Las Vegas Strip it is very dependent on air travelers whose numbers have decreased substantially since the Sept. 11 attacks.

In order to attract customers, he said, the company has had to cut prices for its high-prices hotel rooms, thus affecting their bottom line.

August visitation

No question Las Vegas has felt the impact of last month’s tragedy but in numbers just released by the Las Vegas Convention and Visitors Authority the community showed a 2.4% increase in visitation during the month of August.

The Authority reported that visitor volume reached 3,205,249 this August as opposed to last year’s 3,130,362.

Helping to boost the numbers was an increase of 16.2% in convention attendance and a jump of 5.2% in the number of total passengers that passed through Las Vegas’ McCarran Airport.

Showing a decline was the number of automobiles counted at the Southern California traffic station at Yermo, Cal. The total number of cars counted amounted to 520,250, down 5.3% from last year’s 549,228.

Dockside issue

The efforts by Indiana riverboat casino operators to get state approval for dockside gambling continue to be thwarted by Gov. Frank O’Bannon and his administration.

Last week, Indiana’s House of Representatives approved a measure that would have permitted the boats to remain moored while conducting their gaming session. But, the bill failed to clear a Senate committee.

Particularly frustrating to proponents was the issue of increased revenues needed to ease the state’s fiscal crisis, caused by the first decline in revenues in the past two decades.

Said one legislator, “I can’t believe the governor’s aversion to dockside gambling is stronger that his aversion to a general tax increase.”

Affected by the dockside ban are riverboats operated by Argosy Gaming Co. (AGY), Aztar Corporation (AZR), Boyd Gaming Inc. (BYD), Hyatt Gaming Corp., Trump Hotels & Casino Resorts (DJT) and Pinnacle Entertainment Inc. (PNK), as well as privately-held Don Barden’s Majestic Star and Jack Binion’s Empress Casino.

Slots at issue

There’s a new man in the governor’s mansion in Harrisburg, Pa., and that has prompted slot machine advocates to revive their efforts to place the gambling devices in the Pennsylvania’s racetrack.

Spearheading the drive is Tom Kauffman of the Pennsylvania Horse Racing Association who underscores the disadvantage the state’s racetracks face in competing with tracks in Delaware and West Virginia where slots provide the revenue to boost race purses.

“Pennsylvania purses are 35% below the national average and only half the size of our regional competitors,” Kauffman said. “As track attendance continues to fall it has become all too clear that Pennsylvania horse racing can no longer effectively compete with neighboring racing industries,” he said.

The tracks involved are The Meadows, operated by Magna International Entertainment Inc.(MIEC), Penn National and Pocono Downs, operated by Penn National Gaming Co. (PENN), and English-owned Philadelphia Park.

Louisiana license

Three companies are awaiting a decision by the Louisiana Gaming Control Board relative to the state’s 15th and last riverboat gaming license. The decision could be announced this week.

Seeking the license are Pinnacle Entertainment Inc. (PNK), Horseshoe Entertainment, and Louisiana Horizons LLC, a partnership involving local investors and publicly-traded Isle of Capri Inc. (ISLE).

In recent hearings, all three companies have been faulted in one way or another.

Board investigators have suggested that Pinnacle’s $220 million resort in Lake Charles might be financially unsound in light of the country’s economic slowdown. The Horseshoe Shreveport proposal was criticized because its owner, Jack Binion, recently was forced out of Illinois because of past relationships. And, Louisiana Horizons said they would depend on support from the local market prompting the suggestion that “it would be taking dollars away from (local) families.”

Some observers have already suggested that the Board may elect not to award the license to any of the applicants.

Tribal exhibit opens

An exhibit depicting the historical role played by the Mashantucket Pequot Tribe in the region of southeastern Connecticut has been opened at the Foxwood Resort.

The 1,200 square foot exhibit at the information center for the Mashantucket Pequot Museum and Research Center, features new exhibits about the Tribal Nation and its award-winning museum located about a mile from the casino.

Additionally, the new exhibit will display a highly-detailed scale model of the half-acre Pequot Village, one of the signature attractions within the 308,000 square foot museum.

The Insider

Mandalay Resort Group announced on Monday that the opening of its planned convention center at Mandalay Bay Resort & Casino has postponed to January, 2003.

Three conference calls during which gaming companies will report on their most recent fiscal experience have been scheduled. Both Aztar Corporation (AZR) and Anchor Gaming (SLOT) will report on Wednesday, Oct. 17; Aztar’s call will be at 8 a.m. and Anchor 1:45 p.m., PDT. Penn National’s call will be at 8 a.m. on Thursday, Oct. 25.

Gaming revenues in Missouri may have been impacted by the events of Sept. 11 but it wasn’t obvious in the totals. The state’s Gaming Control Board reported that revenues for September were $94.5 million, a 10% increase over last year.

GTECH (GTK) has signed a new nine-year facilities management contract with the Texas Lottery Commission.

Aristocrat Technologies Inc. says it has begun installations of its CASH EXPRESS linked progressive gaming platforms after having received approval from regulators in several jurisdictions.

GEM Communications, sponsor of the World Gaming Congress & Expo, reports that its magazine, Indian Gaming Business, has been named the official publication of the National Indian Gaming Association.

Nevada Gold & Casino Inc. has moved its trading from Nasdaq to the American Stock Exchange. It now trades under the symbol UWN.

VSS Enterprises, operator of the Castaways Hotel/Casino on Boulder Highway in Las Vegas, says it has scrapped plans for a Tahitian Isles project on property in Henderson and will instead build a 30,000 square foot Tuscan-themed casino with two hotels each containing 200 rooms.

President Casinos Inc. (PREZ) reported a net loss of $2.3 million or $0.46 a share for the three-months period ended on August 31. This compared with a net loss of $15.7 million or $3.13 per share last year for the same period.