Maryland would own
slots in new deal

Mar 25, 2003 6:11 AM

MARYLAND MOVING IN RIGHT DIRECTION: That’s the word from our East Coast pipe.

"Yes, the new Republican governor, Robert Ehrlich, has been badly handling his racetrack slots proposal, but despite his political bungling, the legislation will be approved by June 1," said the pipe.

He explained that the Senate recently passed legislation by a very small majority and the House leadership, all Democrats, has been reluctant to help out a GOP chief executive. "But when all the politics are cast aside, Maryland will see passage of the bill," he predicted.

As part of the legislation, said the pipe, the state will own the video lottery machines, thus saving the tracks from a major expense, and the state lottery commission will supervise their operation. Look forward, he said, to the three major tracks each having 3,500 machines and a smaller track, yet to be built, to add another 1,000 devices.

 

IT’S NOT ALL IT’S CRACKED UP TO BE: Stan Fulton, founder and former owner of Anchor Gaming who now owns and operates Sunland Park racetrack and casino in New Mexico, is finding out the hard way that horse racing has its ups and downs.

His stakes-winning three-year-old, Crackup, underwent surgery last week when it was found that he had bone chips in both ankles. The colt had won the California Cup Juvenile and the Great State Challenge Juvenile before finishing sixth in the recent El Camino Real Derby at Golden Gate Fields.

According to his trainer, Rafael Becerra, the colt will be out of action for as long as four months.

Meanwhile, Fulton still has his speedy three-year-old Roll Hennessey Roll, a multiple stakes winner who found a distance of ground more than he could handle, but who still will make a strong showing in races of shorter distances.

 

WEDDING BELLS ARE BECKONING: It won’t be long before Septuagenarian bridegroom-to-be Sumner Redstone will be walking down the isle after shedding his wife of a half-century.

Redstone, the Wall Street genius who has become the largest single stockholder in WMS Industries Inc. (WMS) and its offshoot, Midway Games Inc. (MWY) while controlling media giant CBS, reportedly was telling friends that his new Los Angeles abode has 20,000 square feet. Quite a difference from his previous residence that had a modest 1,500 square feet.

 

LOOKING FOR A BIG RETURN: According to Forbes magazine, the best bet among gaming stocks for a return on investment is Multimedia Games (MGAM). The company designs and develops interactive bingo and lottery games that are sold to Native American bingo halls and has annual revenue of $315 million.

In its report, identifying Multimedia Games as having a return on equity during the past 12 months of 52%, the company’s shares have declined 48% over the past year and now sell for eight times estimated 2003 profits.

Earnings, said the magazine article, are predicted to rise 38% next year to $2.41 per share.

 

 

WHO NEEDS MORE ROOM IN THE INN? There is another wave of room towers currently being built or proposed on the Las Vegas Strip, but if history is a guide these new towers won’t pay for themselves.

That’s the assessment of an insider at Goldman, Sachs & Co., who adds that of five previous room tower additions during 1996-1997, only one posted enough incremental profit to reach an acceptable internal rate of return.

The single successful tower addition, at The Rio, required a massive repositioning just two years after the tower was built. Currently, Mandalay Bay, The Venetian, and MGM’s Bellagio are all building towers, while Caesars Palace is also seriously considering adding a new tower.

The casinos’ gaming stocks have already suffered due to weak operating trends, but investors could be further disappointed by the weak returns and expense of these new room towers.

"This focus on adding more rooms rather than increasing existing business is a curse that has plagued the industry and resulted in diminished returns," said a pipe who asked not to be identified.