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Gaming stock index rises in January4 February 2013
Two planned buyouts helped fuel average daily stock price increases for publicly traded casino operators and gaming equipment manufacturers during January.
Pinnacle Entertainment, Inc. announced in late December it would buy regional gaming rival Ameristar Casinos, Inc. for an enterprise value of $2.8 billion. On Thursday, lottery equipment provider Scientific Games Corporation announced an acquisition of slot machine manufacturer WMS Industries Incorporated in deal worth $1.5 billion.
Brian Gordon, a partner in Las Vegas-based financial adviser Applied Analysis, said both transactions, which could close this year, helped fuel interest in the gaming sector.
"A recent acquisition and investor anticipation of the quarterly earnings season drove valuations higher during the month," said Gordon, whose company follows the progress of eight casino operators and four equipment providers for the Applied Analysis Gaming Index.
The uptick in stock prices and market capitalizations help push the Gaming Index up 7.9 percent to 460.08. The index accounts for some 300 market variables.
Casino companies with holdings in Macau led the charge for gaming stocks, fueled by news that the region produced a record $38 billion in gaming revenues in 2012.
Average daily share prices for both Las Vegas Sands Corp. and MGM Resorts International increased by 14 percent during January.
Las Vegas Sands told investors Wednesday that the company's four casinos in Macau collected more than $6.4 billion in revenues in 2012, including $1.97 billion in the fourth quarter, a 48 percent increase.
"We got the general blueprint of Las Vegas Sands' earning correct, Macau outperforms, Singapore and Las Vegas underperform," Cantor Fitzgerald gaming analyst Robert LaFleur told investors. "What we didn't get right was the magnitude of Macau's strength and how that would overwhelm any concerns about Singapore and Las Vegas."
All three Nevada-based companies operating in Macau; Las Vegas Sands, MGM Resorts and Wynn Resorts Ltd., are developing new hotel-casino projects in the Chinese gaming market.
Las Vegas Sands plans to build a $2.6 billion Paris-themed resort.
"At this point, we have not yet assigned a value to the shares for this opportunity," Janney Montgomery Scott gaming analyst Brian McGill told investors. "However, we expect the project would be a major tourist draw and would be wildly successful."
When the Pinnacle-Ameristar deal was announced Dec. 21, Ameristar shares soared in value to the proposed buyout price of $26.50.
A similar occurrence took place Thursday, when the WMS buyout was announced. Shares of the slot machine maker surged more than 51 percent.
Sterne Agee gaming analyst David Bain thought the WMS deal would help the share prices of rivals International Game Technology and Bally Technologies.
"We think the transaction demonstrates cash flows as undervalued for both Bally and IGT, and could bring speculation of further consolidation in the casino supplier space," Bain said.
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