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Howard Stutz

Nevada gaming revenues jump 8.1 percent in October

12 December 2011

LAS VEGAS, Nevada -- Nevada's 8.1 percent gaming revenue jump in October wasn't a surprise to analysts.

During third-quarter earnings conference calls last month, Strip casino operators expressed optimism despite market turmoil and economic uncertainty.

"MGM Resorts (International) noted on its conference call that October was one of the best (profit-to-cash flow) months of the year," JP Morgan gaming analyst Joe Greff told investors Friday.

The Gaming Control Board confirmed those early reports as Nevada casinos broke a two-month gaming revenue slide during October.

Statewide, gaming revenues were $960.7 million, an 8.1 percent increase compared with $888.6 million in October 2010.

On the Strip, casinos collected $560.5 million from customers, a 13.3 percent increase compared with $494.8 million collected in the same month last year.

Wells Fargo Securities gaming analyst Dennis Farrell Jr. told investors October's results provide further evidence the Las Vegas market is in a gradual recovery.

"We continue to expect modest revenue improvement from large gaming operators as Las Vegas demand rebounds over the next 12 months," Farrell wrote in a research report. "The Strip can generate modest growth, as corporate convention spending recovers and moderating room supply in 2012 facilitates higher average daily room rates."

Investors soaked up the positive news and sent the stock prices of several casino operators up in value Friday. On the New York Stock Exchange, MGM Resorts closed at $10.03, up 16 cents, 1.62 percent, while shares of Las Vegas Sands Corp. rose 74 cents to close at $43.97, up 1.71 percent. Boyd Gaming Corp. rose 19 cents, 3.08 percent, to close at $6.36.

On the Nasdaq National Market, Wynn Resorts Ltd. rose 68 cents, 0.62 percent, to close at $110.86, while shares of M Resort owner Penn National Gaming increased 93 cents, 2.65 percent, to close at $36.08.

"Expectations for October were high," Macquarie Securities gaming analyst Chad Beynon told investors. "We think the headline number was within expectations."

Control board Senior Research Analyst Michael Lawton said the Strip's results were even more impressive when stacked up against the results from October 2010, which was a nearly 16.1 percent increase compared with October 2009.

Lawton said the results were the first monthly double-digit increase following a previous-year double-digit increase since July 2007.

High end baccarat play on the Strip was big, but that was just part of the overall October equation.

Lawton said revenues from slot machine play increased 5.4 percent, the sixth consecutive monthly increase. The amount wagered on slot machines grew 3.1 percent, the seventh monthly increase in the last eight months.

"It shows that the Strip is seeing a much broader growth," Lawton said.

Baccarat broke all monthly records for October. Baccarat revenues of $159.3 million was an increase of 74.3 percent from a year ago. The amount wagered was $838.7 million, a 67.5 percent increase. Casinos held roughly 19 percent of the money wagered on the game, well above normalized hold of 11 percent or 12 percent and better than last year's October hold percentage of 18.2 percent.

The baccarat figures were helped along by several special events, including the Chinese Golden Week holiday.

"Given the growth was primarily driven by baccarat, we think MGM Resorts will benefit the most from this revenue breakdown as we estimate that they control over 40 percent of the baccarat market with Bellagio, CityCenter Aria Resort & Casino and MGM Grand Las Vegas," Beynon said.

October ended consecutive months of gaming revenue declines in August and September both statewide and on the Strip, which followed three straight months of positive results.

For the first 10 months of the year, gaming revenues are up 4.8 percent on the Strip and 2.5 percent statewide compared with the first 10 months of 2010.

Elsewhere in Nevada, the October results were mixed. Reno gaming revenues fell 12.3 percent while all of Washoe County was down 9.3 percent.

Casinos along the Boulder Strip and in North Las Vegas experienced double-digit gaming revenue increases during the month. On a whole, Clark County gaming revenues grew 10.4 percent.

Nevada collected $65.4 million in gaming taxes during November, based on October's gaming revenues. The figure was an 8.6 percent increase compared with the same month last year. For the first five months of the fiscal year, gaming tax collections are down 2.4 percent compared with the same five months last year.
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