Analyst skeptical on Texas casino legislation

22 March 2011

LAS VEGAS, Nevada -- One gaming analyst isn’t putting much stock into Texas legalizing casinos anytime soon.

And that’s good news for Las Vegas-based regional casino operator Pinnacle Entertainment.

In a note to investors, Morgan Joseph gaming analyst Justin Sebastiano said a handful of bills were introduced in the Texas Legislature that support different forms of casino gambling legalization.

The legislation proposals call for amendments to the state constitution, which require a two-thirds vote from both the House of Representatives and the State Senate. Afterward, a majority vote of Texas citizens is necessary.

Sebastiano doesn’t believe any of the bills will survive.

“Despite the efforts of many gaming groups over the past 20 years or so, gaming legislation has never made its way out of the House or the Senate,” Sebastiano said. “Texas residents have never voted on the topic. Despite the expected budget shortfall that the state would face in the next two years, we believe that, once again, the push for Texas gaming will likely fail.”

Pinnacle Entertainment operates the L’Auberge du Lac Hotel-Casino in Lake Charles, La., which draws the bulk of its business from the customer-rich Houston market, located about a two-hour drive away.

Pinnacle, which already has three casinos in Louisiana, is building a fourth in Baton Rouge.

“Pinnacle Entertainment's long-term growth story remains intact,” Sebastiano said. “We believe the recent slide in Pinnacle Entertainment's stock price is unwarranted and presents a buying opportunity.”

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