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Howard Stutz

Wall Street sees hope despite drop

9 October 2009

LAS VEGAS, Nevada -- Maybe Monty Python was correct.

Despite August becoming the 20th straight month that Nevada's gaming revenues have declined, Wall Street discovered a few "bright side of life" moments in what has become a steady pattern of continually dismal numbers.

"We are encouraged by the August results after a somewhat disappointing July," CB Richard Ellis research analyst Jacob Oberman told the real estate firm's investors.

Casinos collected $847 million from gamblers during August, a 9.3 percent decline compared with the $934.1 million won in August 2008, numbers reported Thursday by the Gaming Control Board show.

On the Strip, results were equally depressing. Gaming revenues were $449.6 million in August, a 9 percent decline compared with $494 million collected in the same month a year ago.

Analysts, however, found positive aspects in a month many predicted would be poor.

JPMorgan gaming analyst Joe Greff told investors that a 9 percent decline on the Strip wasn't bad, given that gaming revenues experienced double-digit percent declines six out of the previous seven months.

"All in all, we think results, which showed sequential improvement, were in line with expectations," Greff said.

He credited baccarat play in August, which had a 48.6 percent increase in revenues and a 45.1 percent increase in the amount wagered, as a key. August marked the fourth consecutive month of year-over-year growth in baccarat revenues.

Without baccarat, gaming revenues would have dropped 19 percent on the Strip, said Frank Streshley, chief of the control board's tax and license division. He said $1 billion was wagered on baccarat in August.

"That's Chinese New Year-type numbers," Streshley said.

Meanwhile, Susquehanna Financial Group gaming analyst Robert LaFleur said the 9 percent decline on the Strip was an improvement over the past 12 months, which had an average decline of 15 percent.

"This was also the first month since February where we saw slot machine win had less than a double-digit decrease," LaFleur told investors. "Baccarat has been relatively strong the past couple months, which should benefit Wynn Resorts (Ltd.), Las Vegas Sands Corp. and MGM Mirage's Bellagio."

Streshley agreed that a 9.3 percent statewide decline and 9 percent Strip decline were better than expected. He said the three summer months -- June, July and August -- had combined declines of 11.9 percent statewide and 11.6 percent on the Strip.

"Nothing was much different from a year ago," Streshley said. "There were no special events in August, plus unlike a year ago, when Labor Day fell on the last two days of August, this year's holiday fell entirely into September."

Statewide, gamblers wagered $9.1 billion on slot machines, a decline of almost 17 percent, and $3.5 billion on table games, a 3.7 percent decrease.

The win from slot machines, $549.1 million, was off 8.3 percent, while table game revenues were $268.8 million, an 11.1 percent slide.

For the first eight months of 2009, state gaming revenues are down 12.85 percent from 2008 while Strip gaming revenues are off 13.6 percent.

All but two areas of Clark County reported revenue declines, from a low of 3.8 percent downtown to a high of 21.5 percent in Mesquite.

North Las Vegas, fueled by the November opening of Aliante Station, reported gaming revenues of $22.1 million, a 22.1 percent increase compared with $18.1 million a year ago.

The Boulder Strip, which includes Henderson, got a boost from the March opening of M Resort. Gaming revenues in August were $63.4 million, a 21.5 percent increase compared with $52.2 million in August 2008.

"We're seeing market shifts," Streshley said.

Gaming taxes collected based on the August gaming revenues were $49.7 million, a decrease of 9 percent compared with $54.6 million collected a year ago.

Revenue results were equally bad throughout the state with jurisdictions reporting double-digit declines of between 10.6 percent (balance of Elko County) and 28.9 percent (South Lake Tahoe). Washoe County hit 26 straight months of declining gaming revenues.