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Howard Stutz

Florida voters back slot plan

31 January 2008

LAS VEGAS, Nevada -- Voters in South Florida on Tuesday overwhelmingly approved a measure to give three locations in the Miami-Dade County area a total of 6,000 Las Vegas-style slot machines.

The vote, by a margin of 63 percent to 37 percent, also gave a financial boost to slot machine manufacturers, who have longed for any sort of domestic market expansion.

"In the long term, we hope that the passage of the bill results in Florida rethinking its casino regulations," Stifel Nicolaus Capital Markets gaming analyst Steven Wieczynski said Wednesday in a note to investors.

He added that non-American Indian operated casinos pay a gaming tax higher than 50 percent while Indian casinos have a minimal tax rate.

"With gaming now widespread in southern Florida, the state might make changes that would level the playing field and increase investment in the area," Wieczynski said.

Gaming analysts said slot machine giant International Game Technology, WMS Industries and Bally Technologies are the slot makers who best stand to benefit from expansion in the Florida market.

The three facilities in Dade County; the Calder Race Course, which is owned by Churchill Downs; the Flagler Greyhound Track; and Miami Jai Lai will each be allowed to install casinos with up to 2,000 slot machines.

Deutsche Bank gaming analyst Bill Lerner said the earnings-per-share impact on the three slot makers by the Florida approval could range from 3 cents to 6 cents per share, depending upon the number of games each company provides.

"These incremental machines are not contemplated in company guidance or Wall Street consensus," Lerner said.

Wieczynski said approval allows the gambling facilities in Miami to compete with racinos in neighboring Broward County, where gaming was approved in 2005. The are also four American Indian casinos in the area.

"We believe that slots can win between $200 and $225 per day in Miami-Dade," Wieczynski said. "The slot-win metric will probably depress in the summer, when retirees head north, and jump in the winter, as has happened in nearby Broward County."

Gaming analysts said slot makers hope the vote outcome in Florida is a positive signal as California voters head to the polls Tuesday. Voters are being asked to approve four Indian gaming expansion referendums that could add up to 17,000 slot machines, primarily at casinos in Southern California.

Wachovia Capital Markets gaming analyst Brian McGill said slot makers could be in for a good 2008 if the voters approve the California expansion.

"Part of our bullish thesis on the equipment operators is a continued proliferation of gaming throughout North America," McGill said in a note to investors. "There are also opportunities for significant growth in California, Kansas, and Maryland over the next several years."

McGill is also bullish on a replacement cycle taking place, in which older slot machines are changed-out in favor of new games with server-based slot machine technology.