David Mckee's Stiffs & Georges - WMS Industries

Optimism in Macao, euphoria at CityCenter

Tue, 08 Sep 2009 17:33:00 -0700

Relaxation of stringent visa restrictions from Guangdong Province came a full four months sooner than expected, starting Sept. 1. Now, residents will be able to visit Macao once a month instead of quarterly. While this has prompted J.P. Morgan to raise its price target on Las Vegas Sands stock, analysts also fret that Sands may overreact and go pedal to the metal on its unfinished Cotai Strip™ hotels.

Those same analysts are bullish on the manufacturing sector, though. They think casinos will be more willing to reinvest in the slot base as 2009 draws to a close. Also, the onward march of casino expansion means more jurisdictions and facilities to whom IGT, Bally and WMS can peddle their products. They're 'meh' on regional casino operators like Penn National, Ameristar Casinos and Pinnacle Entertainment, due to flattish performance. (Penn could catch a break in Kansas, though I still think Cordish Gaming has that sewn up.)

But that's a rave notice compared to the long face Morgan analysts pull when pondering Boyd Gaming's prospects. They cite the slow-to-recover, promo-driven locals-casino market in Las Vegas ("trickle-down" economics of the worst sort); Atlantic City's critical condition -- "the best-case scenario here is that [Borgata] would do less bad" than most of A.C. -- those blah regional metrics and new competition for the Blue Chip riverboat in Indiana, which had been looking like 2009's feel-good story.

Intriguingly, the prospect of a Strip acquistion is floated in lieu of a 'stalking horse' bid for floundering Station Casinos. Boyd's still got enough unused borrowing capacity it could even swing an acquisition of The Mirage (with money to spare), not to mention some of the lower-hanging fruit, which now includes Planet Hollywood. But if the J.P. Morgan guys are gun-shy concerning Boyd ...

They're over the moon about MGM Mirage's CityCenter: "we are increasingly under the belief that City Center will be a new must-see property for both domestic and international gamers/travelers that should drive solid visitation volumes to the Strip in 2010. We were impressed with the massive 18m-square-foot complex ... a new type of high-end product for the Strip that should garner increased trips. It has a very contemporary feel that is different than anything else on the Strip, with lots of natural light and high ceilings, interesting room product and, for a massive property, ease of getting around from one 'neighborhood' to the next."

More good news comes in the form of a press release from Commerce Casino (in Commerce, Calif.), which rolled out the welcome mat for a group of undoubtedly weary firefighters. A strike force of 30 Bay Area-based firemen is being housed in the casino's hotel, with the casino comping all meals and picking up most of the hotel tab. Let's hope that such civic-mindedness spreads through the industry like -- if you'll forgive the analogy -- wildfire.

In case it matters, "super-starlet" (yes, that's the official term) Holly Madison has been given a 12-month contract extension at Peepshow, so she's obviously earning her pay. Also, I've heard through the grapevine that she and incoming Aubrey O'Day do not get along, so the timing of the Madison announcement should make clear who's got the upper implant in this situation.

More Midwest notes

Tue, 14 Jul 2009 10:46:00 -0700

Continuing a trend of lower-than-projected returns across the Midwest, Iowa's riverboats were flat last month and racinos saw a 5% decline. All major operators lost ground but something is very wrong at Ameristar Casinos, whose Council Bluffs boat was way outside the margin, reporting a 15% decline from last year.

Over in Detroit, in the hardest-hit state in America, general economic collapse is finally eating into the casino bidness. With MGM Grand Detroit off 10% and Motor City down 3%, it took a 24% upward leap in revenues at recently expanded Greektown Casino (above) to keep the market on an even keel. With an 0.4% overall decline in dollars won, Detroit stays within the "flat" classification.

Good time to own IGT. Sitting upon Illinois Gov. Pat Quinn's desk is a bill that could swamp the state with as many as 77,000 video slot machines. As J.P. Morgan breaks down the particulars: "video gaming terminals may be placed in 1) licensed establishments (“any licensed retail establishment where alcoholic liquor is drawn, poured, mixed, or otherwise served for consumption on the premises”), 2) licensed truck stop establishments (“facility that is at least a 3-acre facility with a convenience store and with separate diesel islands and parking spaces for commercial motor vehicles”), 3) licensed fraternal establishments (“location where a qualified fraternal organization regularly meets”), and 4) licensed veterans establishments (“location where a qualified veterans organization regularly meets”)."

Morgan analysts take a less-alarmist position on this change, projecting that no more than 40,000 devices will be installed, over a two-year period starting next year. Still, they like the prospects of International Game Technology, which is predicted to snare 60% of the market, with another 30% equally divided between WMS Industries and Bally Technologies -- a bit of a snub to favorite son WMS, no?

Loveman in denial

Mon, 15 Jun 2009 16:36:00 -0700

Harrah's Entertainment CEO Gary Loveman continues his media-availability tour. In today's installment, he grants an audience to the Las Vegas Business Press and insists that not only is everything as right as rain at Harrah's but that the LBO he steered the company into is really "an ability to focus on long-term viability and the health of the business." (Bond analysts remain skeptical.)

Despite bragging on the vast "resources and ... expertise" (like these?) of Apollo Management and TPG Capital, Loveman doesn't have any new strategems or projects to offer. The overwhelming consensus of stock analysts and customers nowadays is that Less = Less at a Harrah's-owned property. Meanwhile, the debtholders who bankrolled the buyout are asked to take haircut after haircut, and could be forgiven for thinking they've been played for suckers. Is anybody benefiting from this deal? Oh, I forgot.

One could go on but the story's mostly a rehash of old Loveman platitudes, plus another refrain of "We Love Macao." Harrah's management has been warbling that tune incessantly of late -- so much so that it sounds like an overt courtship of Pansy Ho, should she and MGM Mirage get a divorce.

The most newsworthy aspect of the story is the accompanying photo, in which the former Harvard prof appears to gotten a deep chestnut-brown dye job. If indeed that's the case, Loveman should ask for his money back: It's not only undignified, it's inept.

Gordie Brown goes down: If you think Loveman gets a bad review, you should read about the Golden Nugget's star attraction, who inhabits "a place where pop culture pressed 'pause' at about the time of 'Achy Breaky Heart,' Hootie & the Blowfish and Forrest Gump."

Then again, there must be people who groove to Hervé Villechaize jokes. Trouble is, they're all going to be down at the Riviera, watching Charo. And when you're described as a poor man's Danny Gans ... well, do the blows land any lower than that?

Great news for slot players: Seven more years of Clue and Battleship. Give Hasbro credit for knowing a good thing (in this case, its alliance with WMS Gaming) when it saw it. And, just because we can't say it enough, WMS' Star Trek machines are the cat's pajamas. Just for the record, you know.

Why are you reading this ...

Fri, 08 May 2009 18:54:00 -0700

... and not out seeing the new Star Trek movie? Unless you already have. (Lucky dog.) Of course, getting a ticket this weekend might be as difficult as finding an empty seat at a Star Trek slot machine. I've seen some themes either get bungled or just plain underused, but WMS was right on target with that puppy.

Quote of the Day

Wed, 04 Feb 2009 11:31:00 -0700

"A good company does not always make for a good stock." -- J.P. Morgan gaming analyst Joseph Greff, downgrading WMS Industries today. Factors in his decision included WMS sales projections that looked over-optimistic in light of a slackening replacement cycle and limited casino expansion. Regarding the slot market, Greff wrote, "Visibility appears terrible."