Investors send mixed signals to gaming stocks

Investors sent mixed messages to the gaming industry's top publicly traded companies during October.

The three largest casino operators, all of which have casinos in the booming Asian gaming markets, saw their average daily stock prices decline during the month.

Meanwhile, slot machine makers, who have fought off reluctance by casino executives to spend money on new gaming devices over the past few years, saw their average daily stock prices soar in October.

"Volatility within the gaming sector continued during October as in the broader markets," said Brian Gordon, a principal in Applied Analysis, which charts the stock prices for 10 companies for its Gaming Index.

Wynn Resorts Ltd., which has two resorts each in Las Vegas and Macau, took the biggest dip in the Applied Analysis index, as the company's average daily stock price fell more than 10 percent in October.

However, Wynn told investors late in the month that its revenues grew 30 percent in third quarter, which included a 41.7 percent net revenue increase in Macau.

"Earnings reports by Wynn Resorts and others shed additional light on an otherwise uncertain operating environment," Gordon said.

The Applied Analysis Gaming Index, which takes in more than 300 market variables and economic indicators, fell 43 points in October to 470.57, largely due to the down performance by Wynn Resorts stock price.

Slot machine manufacturers provided the month's biggest upticks.

Bally Technologies' average daily stock price climbed 12 percent while International Game Technology's stock price was up more than 10 percent on an average daily basis. Bally told investors during the month that its third-quarter revenues grew 14 percent.

Both companies provided large percentages of the nearly 2,500 video lottery terminals at the Resorts World New York City, the casino being operated at the Aqueduct Race Track by Malaysia-based Genting.

The casino's first phase opened Friday to large crowds. The second phase is expected to open in six weeks. The much-anticipated casino was expected to boost slot machine makers, which were providing their newest games and systems to the casino.

Macquarie Securities gaming analyst Chad Beynon said Genting decided to open with a large diversity of slot machines from various companies, due partly to a consumer base of Asian-American customers from the New York area.

"While the property will take some time to ramp, we believe the property will be successful in terms of driving high levels of gaming play," Beynon told investors. "Anecdotally, we recognized that slot machine minimum wagers were extremely high on the floor, and given the high occupancy rates for the opening, players were forced to play higher denomination slot machines."

New York media reported the casino reached capacity quickly after the opening, forcing many people to wait in line outside. Management said more than 15,000 people were inside shortly after opening with another 5,000 waiting to get in outside.

Union Gaming Group principal Bill Lerner said Resorts World could draw business from Atlantic City and other gaming markets in the region.

"The strong opening reaffirms our view that Genting will draw significant convenience customers from the New York tristate area, and perhaps destination-based customers in the future should table games eventually be approved," Lerner said.