Most gambling stocks have September swoon

Shares of the major casino operators and slot machine manufacturers, which slumped in price along with the rest of the stock market during Monday's record 777-point decline, regained some of their lost value Tuesday.

But the one-day recovery wasn't enough to keep nine out of 10 gaming companies from recording a month-over-month decline in their average daily stock prices in September. It was the sixth time out of the past seven months that gaming shares fell in value.

Only regional casino operator Ameristar Casinos' average daily stock price increased when comparing September with August.

"The effects of bank closures, liquidity challenges and overall fear within the system have wreaked havoc on the majority of industries, including gaming," said Brian Gordon, a partner in Applied Analysis, a Las Vegas financial consulting company that charts 10 gaming companies for a stock index.

A day after the House of Representatives rejected a $700 billion bailout of the nation's financial system, fueling the all-time record one-day drop in the Dow Jones industrial average, speculators and investors helped the markets recover 485 points on Tuesday.

Gaming shares rebounded somewhat. MGM Mirage was up almost 10 percent, Las Vegas Sands Corp. gained 9 percent and Wynn Resorts Ltd. was up almost 5 percent. But the damage of slumping stock prices in September was too much to overcome.

"The last pullback in the financial markets has many institutions conserving cash, impacting an already tight capital market," Gordon said. "Wall (Street) remains concerned about gaming operators' ability to weather the storm and comply with debt covenants going forward."

The Applied Analysis Gaming Index fell almost 40 points in September to 371.91, erasing a 41-point climb in August.

Shares of Las Vegas Sands, Wynn Resorts, Boyd Gaming Corp., Pinnacle Entertainment Inc. and slot machine maker International Game Technology, recorded double-digit drops in their average daily price per share during September.

Some of the gaming companies hit historic low prices in September. IGT fell to a six-year low after the company revealed it was expecting to lay off a yet-to-be-determined number of employees to cut expenses.

Meanwhile, Gordon said some of the privately held gaming operators, such as Station Casinos and Harrah's Entertainment, which went private this year in multibillion-dollar private equity buyouts, could also be affected if they were to seek publicly owned bonds to finance expansions.

"Elevated interest charges for highly leveraged operators, particularly those that financed privatizations, could be problematic," Gordon said.

In addition to IGT, slot machine makers WMS and Bally Technologies also took their lumps.

Despite the sour market, however, Bally announced Monday it had obtained $300 million in financing, giving the company some flexibility to expand several business initiatives.

JP Morgan gaming analyst Joe Greff said the announcement's timing could be viewed as a surprise.

"The ability to get the facility in place in the current environment is a significant positive for Bally shares," Greff told investors. "It removes an overhang on the stocks, provides Bally with additional financial flexibility and speaks to the strength of Bally's operating fundamentals and balance sheet."

Bally shares rose $3.92, or 14.97 percent, Tuesday to close at $30.28 on the New York Stock Exchange.

Contact reporter Howard Stutz at hstutz@reviewjournal.com or 702-477-3871.