Casinos mending losses from 9-11

Sep 24, 2002 5:43 AM

A panel of top Wall Street analysts used the Global Gaming Expo to say that the gaming industry is bouncing back.

"Las Vegas is recession resistant," said Lawrence Klatzkin, managing director at Jefferies & Co. "I could remember a time when nine percent of the consumer dollar was spent on gaming. Now it’s 18."

A year after the tragic 9-11 disaster, the gaming industry is continuing to recover even if travel is more restricted.

"Every market in gaming was up in August," said John Kempf, vice president and senior high yield analyst at Goldman Sachs & Co. "People want to stay closer to home and they are finding that gaming is more and more an accepted form of entertainment."

David Anders, senior managing director for Bear Stearns & Co., said there has been a 3-to-6 percent growth in riverboat gambling.

"The regional markets are able to provide suitable gaming entertainment," Anders said. "I put Pennsylvania at the top of the list for states wanting to add gaming to generate revenue. I have never seen gaming used as a political campaign tool as I’ve seen it now."

Anders also put Kentucky, Nebraska, Ohio and Maryland on his list of states that could also turn to gaming, but maintained that Las Vegas would never be threatened by the rising interest.

"All these states can offer is slots and that alone could never put Vegas out of business," he said.

Wall Street is divided on how the widely-anticipated opening of the Borgata next year will affect Atlantic City in the short-term.

"It’s the first hotel to go up there in 13 years," said Robin Farley, executive director at UBS Warburg. "How it does is a billion dollar question."

Klatzkin predicted Borgata would not due 100 percent business during the first six months due to "inefficent marketing," but would rebound strongly in the second year."

Harry Curtis, managing director at J.P. Morgan had a different view.

"It’s akin to Las Vegas when the Mirage opened," Curtis said. "There hasn’t been anything new at Atlantic City since the Taj (Mahal) opened. I think it will produce high revenues in six months. People will be shoulder to shoulder."

The majority of the Wall Street panel labeled Stations Casinos as the top choice for stock investment.

"Stations now has 11 properties and a $35 million stable cash flow," Kempf stated. "At $14 a share, there is a definite high side. I can see it going into the 20s."

Also gaining favorable stock ratings were MGM MIRAGE, the Venetian, Argosy and IGT.

"Ironically, regulations are actually a good thing as far as investors are concerned," Anders said. "It provides a comfort zone. People tend to want to invest when they know an industry has to report figures every 30 days."