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Best of Howard Stutz

Gaming Guru

Howard Stutz

Gaming stocks mostly down in November

1 December 2009

LAS VEGAS, Nevada -- Gaming stocks were sluggish in November as investors tried to judge the repercussions of third-quarter results and anticipate the effect the opening of CityCenter will have on the Strip.

Only three of the nine gaming companies charted by Las Vegas-based financial consultant Applied Analysis saw an increase in their average daily stock prices in November compared to October.

"The latest monthly performance within the gaming sector was impacted by the interpretation of recent third-quarter earnings reports, speculation about expansions domestically and internationally, and other industry news," Applied Analysis principal Brian Gordon said in a report to clients.

The declining stock prices sent the monthly gaming index to a drop of less than 1 percent to close at 291.10.

But the opening of the $8.5 billion CityCenter development looms large, especially for MGM Mirage, which owns 50 percent of the project. The financial troubles of its joint venture partner, Dubai World, came to light just before Thanksgiving with the investment arm of the Persian Gulf emirate hinting it might have to default on $60 billion in debt.

However, analysts said CityCenter would not be harmed because its fully funded and Dubai World isn't required to make any additional construction payments.

MGM Mirage saw its average daily stock price decline almost 7 percent in November.

Gordon said CityCenter "is part of a changing future for the company."

Penn National Gaming, which made a brief bid in U.S. Bankruptcy Court to acquire the shuttered Fontainebleau project, recorded a 5 percent increase in its average daily stock price, while rival regional casino operator Ameristar Casinos saw its average daily stock price climb 6 percent.

Penn, which made a stalking horse bid of $50 million for Fontainebleau, was outbid a week later by corporate raider Carl Icahn, who set the stalking horse bid at $155 million for the bankrupt hotel-casino that was 70 percent completed when construction was halted in April. An auction is scheduled for Jan. 21.

Shares of Pinnacle Entertainment fell just 2.5 percent even though Chairman and Chief Executive Officer Dan Lee resigned early in the month, less than a week after he reportedly threatened the political career of a St. Louis County Council member over a zoning vote. A permanent replacement has not been named.

Slot machine manufacturers didn't see much of a bounce in their average daily stock prices despite the anticipation of the Global Gaming Expo, which was held in November in Las Vegas. The share price of Bally Technologies averaged 6 percent higher compared with International Game Technology (a 4.5 percent decline compared with October) and WMS Industries (down 9 percent).