Fiscal Cliff Concerns Add Volatility to Gaming Sector

by , Dec 4, 2012 | 10:00 am

Concerns over the looming fiscal cliff added increased volatility to an already shaky gaming sector.

Average daily stock prices for eight of the 12 casino operators and slot machine manufacturers followed by financial consultant Applied Analysis tumbled in November.

Boyd Gaming Corp. and Caesars Entertainment Corp. experienced double-digit percentage declines in their average daily stock prices despite events that what many analysts termed as good news.

Overall, the stock price dip contributed to a 10 point decline in the Applied Analysis Gaming Index, which accounts for more than 300 different market variables. It finished at 420.52.

Applied Analysis principal Brian Gordon said mixed results in third-quarter earnings reports announced by several gaming companies contributed to the slide.

Recently, companies such as International Game Technology, Wynn Resorts Ltd. and Las Vegas Sands Corp. announced plans to pay shareholder dividends in December as a move to divert higher dividend income taxes in 2013.

Las Vegas Sands will pay a $2.75 per share dividend on Dec. 18 that will provide majority shareholder Sheldon Adelson and his family nearly $1.2 billion.

Shares of Las Vegas Sands declined more than 2 percent on an average daily basis in November, but the largest drop, 19.3 percent, belonged to Boyd Gaming.

During the month, the casino operator completed a $1.45 billion purchase of rival regional casino operator Peninsula Gaming, which gave Boyd five casinos in three states.

Most analysts expressed positive sentiment toward the acquisition, which strengthened the company’s presence in the Midwest.

“With this transaction, Boyd Gaming has achieved material diversification of its portfolio from the local Las Vegas Locals market,” Deutsche Bank gaming analyst Andrew Zarnett told investors. “(Boyd) has put in place a clear long-term plan to meaningfully delever the balance sheet, when the two entities ultimately combine.”

Caesars Entertainment’s average daily stock price tumbled 14 percent. Earlier in the month, the company announced $185 million remodeling of Bill’s Gamblin’ Hall on the Strip. On Thursday, Caesars said it would close the small casino on Feb. 4 for a yearlong renovation.

Of the four companies with average daily stock price increases in November, Penn National Gaming, which owns M Resort, had the largest gain, almost 4 percent.

Penn National on Nov. 16 announced plans to split the company into a real estate investment trust and an operating company.

“While the concept is not new, the company’s stock responded positively,” Gordon said.

Analysts said other gaming companies might evaluate a similar deal structure.

Cantor Fitzgerald gaming analyst Robert LaFleur told investors the three largest casino operators – Las Vegas Sands, Wynn Resorts and MGM Resorts International – weren’t likely to follow the REIT model.

The goal, LaFleur said, is to return capital to shareholders.

While Penn National went the REIT route, Las Vegas Sands granted the special dividend.

“Different forces are producing similar outcomes for diverse gaming companies that appear to have very little else in common,” LaFleur said. “The lack of sufficient investment opportunities at home and abroad is pushing former casino development powerhouses like Penn and Las Vegas Sands to shift gears.”

AVERAGE DAILY STOCK PRICE Oct 2012 Nov 2012 Change
Ameristar Casinos $18.11 $18.40 1.58 percent
Boyd Gaming Corp. $6.52 $5.26 -19.33 percent
Caesars Entertainment $6.32 $5.42 -14.17 percent
Las Vegas Sands Corp. $45.17 $44.19 -2.18 percent
MGM Resorts Int. $10.61 $9.87 -6.97 percent
Penn National Gaming $41.74 $43.35 3.86 percent
Pinnacle Entertainment $11.98 $12.43 3.78 percent
Wynn Resorts Ltd. $115.44 $109.80 -4.88 percent
Bally Technologies $47.90 $46.26 -3.42 percent
International Game Tech. $12.96 $13.14 1.41 percent
SHFL Entertainment $15.03 $13.60 -9.49 percent
WMS Industries $16.40 $15.93 -2.82 percent
SOURCE: Applied Analysis

Contact reporter Howard Stutz at or 702-477-3871. Follow @howardstutz on Twitter.
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