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Best of Howard Stutz

Gaming Guru

Howard Stutz

Florida Slot Approval Doesn't Boost Manufacturers' Stocks

10 March 2005

LAS VEGAS -- The approval Tuesday of slot machines at three racetracks and a jai-alai fronton in Broward County, Fla., gave gaming equipment manufacturers an emotional boost but not much of a jump in stock values.

That boost could happen down the road.

For now, slot makers and gaming analysts are encouraged that some domestic expansion could be in the offing.

"Anytime a market opens up, it's good for our industry," Alliance Gaming spokesman Marcus Prater said. "We would hope that our Bally games would find a place in those locations once it's decided how it will take shape."

Florida voters in Broward County, which includes the Fort Lauderdale area, voted 57 percent to 43 percent in favor of having slot machines at the Hollywood, Gulfstream and Pompano Park racetracks and at the Dania Jai-Alai fronton.

Voters in Miami-Dade County, however, rejected the slot-machine proposal by a 52 percent to 48 percent margin.

The issue now goes to the Florida Legislature, which is mandated to enact legislation no later than July 1. Republican Gov. Jeb Bush, who opposed the measures, has pledged to work with the Legislature in passing a slots bill since voters in one county approved slots.

"Obviously, we're encouraged by the aspects of the slot machine measure, but we'll just watch and see where it goes from there," said Ed Rogich, spokesman for slot-machine industry giant International Game Technology.

Prater said slot makers can't concern themselves with how measures move through the Legislature.

Deutsche Bank gaming analyst Marc Falcone said the vote was a positive step for the slot makers, but the appearance of slot machines at Broward County locations could be a few years off.

"We would not be surprised to see a tax rate north of 50 percent ultimately enacted," Falcone wrote in a note to investors. "In addition, there could be a renewed push from the antigaming groups to challenge the outcome of the election."

Falcone said the Miami-Dade racetracks and fronton that lost out on the slots could oppose the measure because they would be at a competitive disadvantage from the Broward locations that would have slots.

Bear Stearns gaming analyst Joe Greff said the contentious nature of politics in Florida could keep slot machines out of the tracks until 2007 or 2008.

He said Florida lawmakers could try and kill the measure with a large gaming tax and burdensome gaming regulations.

"Despite this, we view the passage of the slots referendum in Broward as a modest positive to IGT," Greff said in a note to investors. "Yesterday's vote could open up the door to Class III slots for the Native American tribes. We believe the four facilities in Broward and possible Native American Class III expansion represent a maximum 20,000 slot machine opportunity in Florida."

Prater said a move to Class III slots, the kinds of slots that are in Las Vegas casinos, would boost Alliance. The company, he said, has about 80 percent of the slot machine floor at the Seminole Hard Rock in Tampa.

The Florida news didn't have much effect on slot makers' stock prices Wednesday.

IGT closed at $29.09, down 60 cents or 2.02 percent; Alliance Gaming closed at $11.30, down 22 cents or 1.91 percent; WMS Industries closed at $30.62, up 3 cents or 0.1 percent.

Prudential Equity Group gaming analyst Bill Lerner said the Florida vote could spur slot machine expansion from the mid-Atlantic to the Midwest.

"We believe Kentucky may now be incrementally predisposed to allow slots due to the fierce competition for larger purses at racetracks," Lerner said in an analyst's note. "Clearly West Virginia is contemplating table games at its racinos, Pennsylvania has already passed gaming legislation (including racinos), Maryland is debating it, and Ohio may now be more inclined to expand gaming after Gov. (Robert) Taft is out in 2006."

Florida Slot Approval Doesn't Boost Manufacturers' Stocks is republished from