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Analysts praise Pennsylvania table games approval

7 January 2010

LAS VEGAS, Nevada -- Pennsylvania Gov. Ed Rendell signed a bill into law last week that will allow the state's slot machine-only casinos to add table games to gaming floors.

The new law will allow large Pennsylvania casinos to add up 250 table games each and smaller resort style casinos can add 50 games each. Casino operators will pay an upfront license fee of $16.5 million and table game revenue will be taxed at 16 percent initially, dropping to 14 percent after two years.

"The favorable tax rate … is a significant positive for operators in Pennsylvania," JP Morgan gaming analyst Joe Greff told investors.

State gaming regulators expect it would take up to six months before the first toss of the dice and cards are dealt.

But Wall Street isn't waiting to comment.

Roth Capital Partners gaming analyst Todd Eilers told investors that, theoretically, Pennsylvania could reach 3,100 table games with 14 casinos.

"We estimate initial demand to be closer to 815 games based on the existing number of casinos in operations, final tax rate and upfront license fee," Eilers told investors.

The three biggest winners in the passage appear to be Shuffle Master Gaming, Penn National Gaming, which operates a casino in Harrisburg, and Las Vegas Sands Corp., owner of Sands Bethworks in Bethlehem.

Las Vegas-based Shuffle Master is the primary supplier for automated card shufflers. Some analysts predicted the company could place up to 500 of the devices in the state.

With table games, Sands Bethworks, which is located about a one-hour driving distance outside Manhattan, could draw additional customers and allow Las Vegas Sands to add additional non-gaming amenities.

The biggest loser, said Stifel Nicolaus Capital Markets gaming analyst Steven Wieczynski, are the casinos in Atlantic City.

"Atlantic City properties will be under more pressure as table games were their last line of defense," Wieczynski said. "Atlantic City could now lose more customers from the New York City area."