Gaming stocks rebound in 2010 after dismal showing in ’09

Stock prices for publicly traded casino operators and slot machine manufacturers rebounded in 2010 following a disastrous 2009.

Of the 10 gaming companies followed by Las Vegas-based financial consultant Applied Analysis, only slot machine giant International Game Technology saw its average daily stock price tumble. Shares of IGT were down 10 percent at the end of December when compared with the average daily price at the end of December 2009.

Five of the seven casino operators charted by Applied Analysis saw double-digit gains in their average daily stock price compared with 2009. Shares of Las Vegas Sands Corp. were up almost 200 percent compared to the average daily price at the end of 2009.

"The latest calendar year demonstrated the resiliency of gaming operators, despite selected reorganizations that took place within the market space," Applied Analysis Principal Brian Gordon wrote in a report to the firm’s clients. "The past year also signaled that investors remain optimistic about the recovery in domestic and international travel and related spending, while local and regional operators also benefited from an improved market outlook."

The improvements in casino company stocks helped push the Applied Analysis Gaming Index to a 45.4 percent increase over the past 12 months, growing from 286.18 in December 2009 to 416.00 in December 2010.

The Index fell almost 21 points in December, however, because Las Vegas Sands, Wynn Resorts Ltd. and Ameristar Casinos all saw marked declines in their average daily stock prices.

Las Vegas Sands shares fell almost 7 percent after the company announced a portion of its development plans on Macau’s Cotai Strip were given a setback by the region’s government.

Wynn Resorts saw a more than 5 percent decline in average daily stock price in December after the company his a 52-week high in November. Gordon thought the drop signaled profit taking by investors rather than any fundamental moves by the company.

Ameristar shares declined more than 7 percent after the regional casino operator’s board of directors announced it was no longer considering a sale of the company.

MGM Resorts International saw its average daily stock price jump almost 12 percent in December and 38 percent for 2010.

The increase followed the opening of the $8.5 billion CityCenter development in December 2009 and various corporate financing moves that improved MGM Resorts’ balance sheet and leverage.

Macquarie Securities gaming analyst Chad Beynon said MGM Resorts’ prospects are directly aligned with the Strip, which has seen gaming revenues increase 5.4 percent through October.

Baccarat revenues have carried the market, but October’s 12 percent increase in nonbaccarat table game revenue and a 4 percent jump in slot machine revenues were positive signs for MGM Resort, Beynon said.

"At this point, we believe the high-end gaming hotels will continue to flourish, while the low-mid end segments will bear the brunt of the frugal spending consumer mindset," Beynon said. "However, recent data is encouraging for the market."

The average daily stock price for Boyd Gaming Corp. rose nearly 7 percent in December and was up more than 15 percent for the year.

One stock analyst, writing for the MotelyFool.com website, pointed out that Boyd Gaming’s stock price rose almost 57 percent between the middle of September and the end of the year.

Gordon thought the worst of the latest economic cycle had passed and the gaming industry would continue to focus on balancing debt and equity levels with investor expectations during 2011. Expansion opportunities might also arise.

"Improvements in the gaming sector, particularly in Las Vegas, will be sourced to fundamental improvements in the national economy, and stability in key international financial markets," Gordon said.

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

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