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Nevada Gaming Stocks Showing Improvement:
Applied Analysis Gauge Shows 61.4% Year Over Year Gain Since March 2009

By Jennifer Robison, Las Vegas Review-JournalMcClatchy-Tribune Regional News

Apr. 1, 2010--A key stock index that monitors publicly traded gaming companies has posted its best showing since the financial markets melted down in fall 2008.

The Applied Analysis Gaming Index moved up 20 points, or 7 percent, to a value of 305.9 from February to March, according to a Wednesday report from local research and advisory firm Applied Analysis.

The index grew more dramatically when compared with March 2009, rising 61.4 percent year over year. Both the monthly and annual results best the S&P 500, which gained 5.8 percent from February to March and 52.2 percent year over year in March.

Applied Analysis researchers credited the gaming index gains to overall increases in equities markets, as well as increased industry activity and speculation.

"Improvements in the broader market certainly played a role in what we saw in the gaming sector, and expectations for where the national economy is headed play a role in expectations for gaming stocks generally," said Brian Gordon, a principal in Applied Analysis.

Though the index grew in the month and the year, the measure is running at less than half of its 2007 record of 667.09.

Still, Southern Nevada's major hotel-casino operators all enjoyed solid increases in average daily stock prices in the last month and year, the index showed.

Las Vegas Sands Corp., which operates The Venetian and Palazzo on the Strip and several properties in Asia, posted especially big increases. The company ended March at $19.63 a share, up nearly 20 percent from February's $16.38, and up 737.5 percent from its McDonald's Happy Meal price of $2.34 a share in March 2009.

Las Vegas Sands operates three hotels in fast-growing Macau, a special administrative region of China. Sands China raised $2.5 billion in a November initial public offering in Hong Kong, and the company is readying the opening of its Marina Bay Sands megaresort in Singapore. It also opened a Pennsylvania casino in May 2009.

The operator is expanding its global footprint and continues to have healthy growth prospects, Gordon said.

Other hotel-casino owners have begun easing immediate debt burdens.

MGM Mirage, which is weighing an initial public offering in Hong Kong that could raise $500 million in the second half of 2010, recently renegotiated its credit agreements, moving the deals' maturity to 2014 instead of 2011. Wynn Resorts Ltd. also announced a transfer of notes with a 2014 maturity date to notes that would come due in 2020. The moves could mean more liquidity for the operators.

Even a reorganization plan from bankrupt locals-casino operator Station Casinos might have affected the index, Applied Analysis said.

Station has filed a proposal suggesting the sale of 13 of its 18 properties, and that could mean expansion opportunities for operators looking to acquire existing properties, Gordon said. Another key locals-casino company, Boyd Gaming Corp., has been vocal about its interest in purchasing at least some Station assets.

Just two of the index's 10 stocks saw declines in average daily stock prices from February to March, and both were manufacturing companies.

The average daily share price of Reno-based International Game Technology, which owns and operates Megabucks slot machines, fell 3.1 percent from February to March, going from $17.99 to $17.44. Bally Technologies of Las Vegas saw its average daily stock price dip 2.1 percent, going from $40.08 to $39.22.

Gordon said no single factor jumps out as a March troublemaker for slot manufacturers. He did note, though, that a number of states are weighing legalizing casino gambling as a possible cure for fiscal ills, but there's uncertainty about whether those plans will all move forward.

A February report in the Review-Journal noted that Wall Street analysts called out IGT executives in an earnings conference call for being too conservative in their performance projections for 2010, given the stable of new products the manufacturer unveiled at November's Global Gaming Expo. And a recent Goldman Sachs survey found that casino operators were unlikely to replace aging slot-machine inventories anytime soon. The finding led the investment bank to drop its coverage rating of the gaming-equipment sector from attractive to neutral.

Casino operators, at least, can likely expect improved economic indicators for the rest of 2010, Gordon said.

"We're coming off one of the worst years in the gaming sector's history in terms of declines in valuations and declines in fundamentals," he said. "People are spending less, and there's less overall demand. We'd expect some modest improvements in that regard, and the convention and meeting segment is expected to witness some improvements in the second half of the year. That should bode well for operators along the Las Vegas Strip in the second part of the year."

Gordon said researchers at Applied Analysis also expect to see improvements in room prices later in the year.

A Wednesday report from the gaming, lodging and leisure unit at Wells Fargo Securities concurred with Gordon's forecast.

Wells Fargo's analysis predicted near-term weakness in average daily room rates, as CityCenter grabs market share from its competitors in the luxury segment.

But the report also said Wells Fargo remains optimistic that the "value option" Las Vegas provides corporate and convention planners will drive demand for rooms in late 2010 and 2011. That should mean better pricing power for Strip operators focused on the convention market.

Contact reporter Jennifer Robison at jrobison@reviewjournal.com or 702-380-4512.

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Copyright (c) 2010, Las Vegas Review-Journal

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