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Alliance Gaming Receives Buy Rating

31 August 2001

SAN FRANCISCO, California –(Press Release)--August 31, 2001 -- David Barteld, gaming industry analyst at Wells Fargo Van Kasper, has initiated coverage on Alliance Gaming Corporation (Nasdaq: ALLY; $19.03) with a Buy rating and a price target of $25.00.

Below are direct quotations from Mr. Barteld's research report:

We are initiating coverage on Alliance shares with a Buy rating. Using a P/E of 16x our FY02 EPS estimate of $1.57, we derive a 12-month price target of $25. We expect Alliance to grow earnings by more than 20% over the next several years. We believe that the primary catalyst to growth will be the Bally Gaming and Systems division, which includes the slot machine and systems businesses.

We also expect route and casino operations to return minimal growth but provide the company with a stable source of cash flow; it should continue to do this into the foreseeable future. We expect Bally Wulff, the company's European game subsidiary, to report declining revenues and profits, although that business is expected to account for only about 5% of EBITDA in FY02.

We believe that the stability of the route and casino operations' cash flow, combined with the growing recurring revenue base established by the growth of the revenue participation game business, should provide investors with a more consistent and stable earnings base going forward.

Due to the reported operating losses over the past few years, the company has a deferred tax liability that should result in tax-loss carry-forward through at least FY03, which should favorably impact EPS.

We are currently forecasting revenue growth of 31% for FY02 and EPS growth of 37% to $1.57 from $1.14 in FY01. Further, we expect operating margins to improve as a result of the growing installed base of revenue participation games and net margins and as the company continues to pay down debt.

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