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Gaming Guru

Howard Stutz

Gaming Stocks Continue Up; Some Surpass All-Time Highs

3 April 2006

LAS VEGAS, Nevada -- Gaming stocks continued their upward trend in March, with some companies surpassing or nearing all-time high price levels.

Las Vegas-based Applied Analysis, a financial consulting firm that tracks nine major gaming companies for an industry index, said healthy fundamentals within the gaming sector have contributed to the upward swing.

The company's gaming index finished the month at its highest level ever. Applied Analysis has been recording the index since January 2002.

"Visitor volumes continue to press forward, while consumer spending is holding its ground," Applied Analysis partner Brian Gordon said. "We estimate spending on gaming, lodging, dining and retail items posted healthy gains ranging from high single-digits to low double-digits during the first quarter of 2006."

In the index, the average daily stock prices of the six casino operators all rose above their average daily stock prices in February.

Wynn Resorts Ltd., which caught an uptick following its $900 million sale of a right to build a casino in Macau, China, had its average daily stock price climb more than 6 percent in March, finishing the month at $67.70.

Station Casinos, which is opening the $925 million Red Rock Resort on April 18, saw its average daily stock price jump more than 5 percent over February. On Friday, shares in the company closed at $79.37, down 24 cents or 0.3 percent from Thursday's close. At one point Friday, the company's stock price reached $80.72, its highest price ever.

Susquehanna Financial Group gaming analyst Brian McGill said anticipation of Red Rock Resort, in which analysts have heaped praise upon the soon-to-be-unveiled hotel-casino, has caused a run-up on the company's stock .

"This was a pretty strong month for the gaming industry and the sector has closed out pretty strong," McGill said. "There has been a lot of positive commentary coming out about Red Rock and the stock has certainly been acting positively. But there has also been a lot of positive news across the board."

A $2.76 billion stock sale by Las Vegas Sands Chairman Sheldon Adelson and several family trusts and Pinnacle Entertainment's proposed $2.1 billion buyout of Aztar, also helped increase interest in the gaming sector.

Only the slot machine manufacturers International Game Technology and Bally Technologies had an off month; IGT's average daily stock price fell 1.82 percent while Bally's dropped by 0.42 percent.

As quarterly earnings are announced in April, Gordon anticipated that stock prices might affected as shareholders seek to collect any profits.

"We anticipate reasonable operating gains reported by the majority of operators in April," Gordon said. "That having been said, we anticipate profit-taking by investors as valuations have reached new levels, which may cause a modest correction April."