Analysts: Casino stock index reaches high

1 December 2006

LAS VEGAS -- Outside forces, rather than performance, drove the average daily stock prices of three of the gaming industry's largest operators to double-digit increases during November.

A stock index compiled by Las Vegas-based financial consultant Applied Analysis that tracks the monthly performance of six casino operators and three slot machine manufacturers jumped to its highest level ever since it began in January 2002, climbing almost 11 percent in value to 422.92.

Gaming revenues and quarterly earnings reports weren't the reason for the rise.

"There were some softer-than-expected third-quarter earnings reports," Applied Analysis partner Brian Gordon said. "However, there were some external factors and speculation that drove investors' interest in the gaming sector."

Shares of Las Vegas Sands Corp. in November had an average daily price of $85.62, an increase of 15.4 percent over October. Comments by company President Bill Weidner spurred the rise. He said Las Vegas Sands has the potential of raising between $6 billion and $12 billion from the sale of retail space at its projects under construction in Las Vegas and Macau, China. He also said the company could realize another $1 billion to $4 billion from the sales of condominiums at those sites.

Meanwhile, Wynn Resorts Ltd. decided to share the proceeds of a $900 million subconcession sale in Macau with its stockholders in the form of $6 per share dividend. That news drove the average daily stock price of Wynn to $84.79 in November, up almost 18 percent from October.

Not to be outdone, MGM Mirage majority shareholder Kirk Kerkorian announced the day before Thanksgiving he would spend $825 million to increase his ownership in the company to more than 60 percent. The Los Angeles billionaire gave his fellow MGM Mirage stockholders an early holiday treat as the average daily share price in the company was $47.87 in November, an increase of almost 13 percent compared with October.

Majestic Research gaming analyst Matthew Jacob suggested the stock prices of Wynn and Las Vegas Sands also benefited from comments made by Wynn Resorts Chairman Steve Wynn. On Nov. 7, during his company's third-quarter-earnings conference call, Wynn told analysts that results at Wynn Macau during October, the first month of the fourth quarter, were stronger than expected.

"The prospects for Macau have vacillated from bullish to bearish," Jacob said. "Steve gave out some data that helped investors in their analysis of the company. The information helped both Wynn and Sands in their stock prices."

Kerkorian's move to buy additional shares of MGM Mirage was viewed as a vote of confidence by the 88-year-old investor in the long-term prospects of the company's $7 billion Project CityCenter development, Jacob said.

"Kirk announcing he was buying a chunk of the company's stock expressed a bullish view of MGM Mirage's potential from CityCenter," Jacob said.

In October, shares of Harrah's Entertainment jumped more than 16 percent in their average daily price from September on news the company was considering a $15.5 billion buyout by two private equity firms. In November, shares in Harrah's averaged $75.68, relatively unchanged in price compared with $75 in October. The company has still not reached a decision on the purchase offer.

Gordon said shares in Harrah's have been trading based on a discounted rate because of the buyout possibility.

Meanwhile, outside events and speculation didn't affect the shares of two other Las Vegas-based casino operators, Boyd Gaming Corp. and Station Casinos. However, the two companies reported less-than stellar third quarter earnings which affected their shares in different ways.

Boyd Gaming's average daily stock price was $41.03 in November, down less than 1 percent from October. Shares of Station Casinos averaged $66.18 in the month, up almost 9 percent from the prior month.

"The locals market is still adjusting to the new capacity that opened in the past year (South Point and Red Rock Resort), so that is impacting both companies," Jacob said.

All three slot machine makers in the index showed month-over-month positive changes in their average daily stock prices, reflecting investors' confidence in expansion into international markets, gaming analysts said.


Related Links
Caesars Entertainment Ownership Details
MGM Resorts International Ownership Details
Wynn Resorts Ownership Details


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