Gaming expands as revenues shrink

Dec 18, 2001 6:54 AM

“Where will we find the revenues necessary to fund the approved projects and balance the state’s budget,” is the question being asked by lawmakers in at least 37 states.

How about creating or expanding gambling, some have asked.

That’s the subject of a new research report distributed by Deutsche Banc Alex. Brown and written by their analysts, Mark Mutkoski and Joel Simkins. The report is entitled, “2002 Political Outlook: Will Legislators Place Their Bets on Gaming?”

The report focuses on the 10 key markets that the analysts believe are likely to add to or expand existing gaming operations within the next three years. They include Florida, Hawaii, Kansas, Kentucky, Maryland, New Hampshire, New York, Ohio, and Pennsylvania. They even threw in the United Kingdom to make things more interesting.

“Next year may unfold as one of the most intriguing political seasons for the gaming industry since the early 1990s,” said Mutkoski.

“Budget deficits caused by the rapid economic deceleration and stock market decline have forced many states to tighten their belts and take a closer look at the gaming business as a source for tax revenues and jobs,” he said.

New York has already voted to permit Indian casinos as well as slot machines at five of the state’s racetracks.

Kentucky, Maryland and Pennsylvania will be strongly influenced by the effect slots have on such places as Aqueduct racetrack operated by the New York Racing Association (NYRA) if only to protect their ongoing racing industries.

Of particular interest to Kutkoski and Simkins is the influence expanding gaming will have on gaming stocks.

“Individual gaming stocks could become increasingly sensitive to news flow next year as progress is made and/or setbacks are experienced,” Simkins said, adding, “In our opinion, the lowest risk way to play the potential expansion of gaming is by investing in the gaming equipment suppliers.”

To that end, the analysts highlighted International Game Technology (IGT) which they rate a “buy.”