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Deutsche Banc Alex. Brown Initiates Coverage of the Gaming Industry

Shares of Park Place Entertainment Corporation (NYSE: PPE ; $14.25) were started with a STRONG BUY investment rating while shares of MGM Mirage Inc. (NYSE: MGG; $34.44), Mandalay Resort Group (NYSE: MBG; $27.38), Station Casinos Inc. (NYSE: STN; $15.00), and Isle of Capri Casinos, Inc. (Nasdaq: ISLE; $15.44) were started with a BUY investment rating. Harrah's Entertainment, Inc. (NYSE: HET; $29.75) shares were started with an investment rating of MARKET PERFORM.

According to Mutkoski, Big Money has transformed Las Vegas. ``Simply put, Big Money is infrastructure,'' said Mutkoski.

He believes Las Vegas now has the infrastructure in place, including an abundance of high-quality non-gaming amenities and luxury rooms, to be truly competitive with top global destinations for convention and vacation dollars.

``Now that the infrastructure is in place, we think Las Vegas operators are sitting pretty as the business paradigm shifts almost entirely to same-store sales and away from unit growth.''

Furthermore, Mutkoski believes that Big Money consolidation has rationalized Las Vegas and Atlantic City in terms of how operators approach competition, marketing and new development.

``We think the story for the next two years will be considerably different than the last few years as most companies focus on integrating recent mergers, harvesting and redeploying capital where appropriate, improving results at relatively new properties, and investing internally in projects with high return on investment potential,'' said Mutkoski.

``We think modest increases in same-store sales and generally rational markets with relatively low supply growth across the industry will lead to margin expansion, improving returns on investment and much higher free cash flow for an industry that has historically been a consumer of capital.''

Mutkoski believes valuations are attractive relative to historical multiple parameters and should remain stable or improve as investors gain comfort with the same-store sales measure.

``A psychology shift of this nature, assuming gaming companies deliver results, could be the next big catalyst for the group,'' said Mutkoski. ``Our outlook for Las Vegas in this environment is positive and, accordingly, our general outlook for gaming stocks is favorable given Las Vegas' status, more or less, as a barometer for all gaming stocks.''

Deutsche Banc Alex. Brown identifies the US investment banking activities of DB Alex. Brown LLC (formerly BT Alex. Brown Incorporated) and Deutsche Bank Securities Inc., which are indirect subsidiaries of Deutsche Bank AG.

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