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Gaming Guru

Howard Stutz

Las Vegas Sands Shares Get Boost

1 June 2006

LAS VEGAS --Shares in Las Vegas Sands Corp. got a boost in value following last week's announcement the company was awarded the right to build a $3.6 billion casino and entertainment complex in Singapore.

The news also gave a bump to a local financial consulting firm's gaming industry stock index.

Most of the major gaming companies tracked by Applied Analysis saw their average daily stock prices decrease during May, victims of profit-taking by investors worried that rising fuel costs might impact the spending habits of some casino patrons.

The index closed up almost seven points, but without Las Vegas Sands, the index would have posted a 10-point decline.

Brian Gordon, a partner in Applied Analysis which tracks nine gaming companies for the index, said Wednesday that economic assuredness nationally dropped in May, which impacted the gaming sector.

"The market as a whole took a dive during May," Gordon said. "Fundamentals within the sector remained positive, but we believe profit-taking dampened stocks during the month, driven by concerns over discretionary spending patterns, consumer confidence levels and the overall economic climate."

Shares of Las Vegas Sands, traded on the New York Stock Exchange, had an up and down month in May. Las Vegas Sands hit a 52-week high of $72.56 on May 9, but fell below $60 a share in the following weeks. Friday's Singapore announcement sent shares up almost 12 percent.

The company closed its trading session Wednesday at $70.61, up $3.20 from Tuesday's close, or 4.75 percent.

In the index, shares of Las Vegas Sands traded at an average of $67.50 a share, up 8.4 percent from April.

Gordon thought the company's announcement last week that The Venetian would be the first Strip casino to offer its customers the use of hand-held wireless gaming products, was another reason investors were confident in the company.

"There were strong expectations following the company's quarterly earnings announcement early in the month," Gordon said.

According to the index, the only other casino operator to post a gain in its average daily stock price during May was Harrah's Entertainment, at $79.60, up 0.7 percent. The other operators had percent decreases ranging from 1.3 percent (MGM Mirage) to 6.7 percent (Boyd Gaming Corp.). Local gaming giant Station Casinos saw its average daily stock price fall 3.7 percent from April.

"Despite a healthy financial performance, Station Casinos' stock valuation has softened following the Red Rock Resort opening and likely investor profit taking," Gordon also said.

Slot machine giant International Game Technology was the sole gaming manufacturer to post a gain in its average daily stock price in May at $37.84 a share, an increase of 3.6 percent over April.

"It appears that several gaming operators have been unsuccessful reaching back to their peak performance levels earlier this year." Gordon said. "Softness in recent weeks remains for a large segment of the market, including Las Vegas Strip and local casino operators."

Gordon said casino companies with expansion opportunities outside the United States are better able to cover any downturns.

The announced $2.75 billion deal in which privately held Columbia Sussex Corp. agreed to buy Aztar Corp., including the Tropicana, as well as the planned $770 million purchase of the Hard Rock by Morgans Hotel Group, didn't do much to sector's stock prices. But the deals helped establish a value to Strip and resort corridor real estate, Gordon said.

Gaming analysts have valued the Tropicana deal, which include's the property's 34-acre Strip location, at between $25 million and $30 million an acre.