Analyst’s upgrade sends WMS shares up nearly 20%

Aug 5, 2003 4:52 AM

Wall Street descended on WMS Industries Inc. (WMS) in droves Monday following favorable comments made about the company by a couple of analysts.

WMS shares rose $3.28 or nearly 19% to $20.83 after an analyst at Deutsche Bank Securities upgraded his rating on the stock to a "buy" from the previous rating of "hold." Also, J.P. Morgan Chase said it began coverage of the company on Monday and had issued an "overweight" rating.

The comments were enough to cause investors to trade nearly 2.5 million share Monday when a normal day would see an exchange of fewer than 300,000 shares.

Joel Simkins, the Deutsche Bank analyst, said he was impressed with a new machine the company plans to unveil at the G2E Gaming Expo in Las Vegas on Sept. 16. He described the machine as having "the latest bells and whistles, and we think it will turn the numbers around for WMS."

JP Morgan Chase said it would place WMS on its "focus list," a move that normally means the company will outperform its competitors. The various comments boosted WMS to a 17-month trading high.

The Monday action comes about two weeks before the company reports on its fiscal fourth quarter that ended on June 30. Expectations are that the company will report another loss for the quarter of about $0.07 a share. This will follow the two previous quarters when losses were reported.

No bond payment

Officials at Penn National Gaming Inc. (PENN) knew from the start that they would have a problem with Hollywood Casino Shreveport when it acquired its parent company, Hollywood Casino Corp., earlier this year. The troubled Shreveport, La., property was one of five casinos obtained in the purchase.

In March, Penn National said the Shreveport property was valued at $118 million yet it carried a debt load of $189 million. Reason given for the low value was the failure of the property to achieve the gambling revenues expected when it was constructed; higher taxes than first anticipated, and a soft economy.

The company said the property has developed even greater competition now that Harrah’s Entertainment Inc. (HET) installed slot machines at the recently purchased Louisiana Downs in nearby Bossier City.

Penn National has been attempting to negotiate a restructuring of the casino’s debt and last week announced it would not make the $12.3 million in payments due on its debt. Also, the company said it could not eliminate the possibility that the casino could undergo bankruptcy reorganization.

Identified as the bondholders were about 25 insurance companies and mutual funds.

Standard & Poor’s Ratings Services has lowered the corporate credit and senior secured ratings on the debt of Holly Casino Shreveport to "D" from the previous "CCC-." However, the ratings have no impact on the remainder of the debt issued by Penn National Gaming.

The Insider

GTECH Holdings Corporation (GTK) says that its Latin American subsidiary has signed a contract with the National Lotteries Control Board to provide video lottery services in Trinidad and Tobago.

Another reminder of days past”¦Robert Guidry, a former associate of jailed ex-Louisiana Gov. Edwin Edwards, is being sued by the state for all the profits Guidry made while the owner of the Treasure Chest Casino. The property eventually was sold to Boyd Gaming Inc. (BYD).

Magna Entertainment Corp. (MECA) says it is seeking a third-party developer for a retail-entertainment project at Gulfstream Park, the premier racetrack in South Florida.

International Game Technology (IGT) has joined other gaming companies in promoting the sixth annual Responsible Gaming Education Week currently underway. This year’s theme is, "Keeping it Fun."