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Howard Stutz

Gaming stocks swoon in June

30 June 2012

Forget June.

At least that's how gaming industry investors feel about a month when average daily stock prices collectively tanked.

Reaction to the broader economy drove down the values of eight casino operators and four equipment manufacturers followed by Las Vegas-based financial consultant Applied Analysis.

Shuffle Master recorded the biggest slide in its average daily stock price, which was down almost 15 percent in June. The stock prices of Caesars Entertainment Corp. and Las Vegas Sands Corp. also recorded double-digit percentage declines.

"Economic concerns, domestically and internationally, remain top-of-mind for the investment community," Applied Analysis principal Brian Gordon wrote in a report to the firm's clients Friday. "The gaming sector is not immune to broader trends, and in many instances, is more susceptible to market volatility given the source of revenues for major gaming operators."

The Applied Analysis Gaming Index fell 32 points in June.

The sector did have its share of good news - slot machine makers International Game Technology and Bally Technologies were awarded Nevada's first interactive gaming licenses by state gaming regulators. IGT also announced plans for a $1 billion stock repurchasing program over three to four years.

The average daily stock prices of IGT and Bally recorded minimal declines compared with the gaming sector.

"We expect speculative investor demand to continue as attractive price points have emerged relative to levels reported earlier in the year," Gordon said.

Las Vegas Sands plans a $22 billion hotel-casino project in either Barcelona or Madrid, with site selection by September. Company officials in Spain last week said the company would finance most of the project while investing about $3 billion of company funds.

Las Vegas Sands President Michael Leven told Spanish officials there could be challenges in obtaining debt financing, which could stall the project.

"We view the 'no financing means no project' comment as a positive for shareholders," Nomura Securities gaming analyst Harry Curtis told investors. "That may focus management's attention on return of capital to shareholders rather than on projects which could reduce the company's return on invested capital and its multiple."