Santarelli bails on SGMS; Blasts from the recent past

Scientific Games has lost the faith of Deutsche Bank‘s Carlo Santarelli. The analyst put out a “sell” recommendation this morning on SGMS stock, issuing a new target price of $6/share, down from $7. (Scientific was trading at $9.49 at the time.) Is this a big deal? Yes, because you see gaming stocks pegged as a “sell” slightly less frequently than as you see Halley’s Comet. Most Wall Street analysts take refuge in “neutral” ratings on iffy stocks but Santarelli went way out on a limb. Reasons for his decision include the contention that Scientific’s “business model remains stagnant and will continue to be reliant on tough-to-handicap and somewhat binary legislative events [read: politics],” whose benefit to Scientific is difficult to quantify. “[The] rich premium and difficult to identify synergies make the pro forma outlook … daunting,” not least because Scientific is no longer as dominant a candidate for privatized state lotteries and the online-lottery sector has been slow to develop. Or so the argument. Bottom line: Scientific is overpaying for an asset — WMS Industries — with a “difficult fundamental outlook” during a slow business cycle.

Y’all remember Columbia Sussex, the onetime hotel giant whose highly leveraged, low-budgeted venture into the casino industry was its undoing? It continues to shrivel. Last year it had 41 hotels. Now it’s down to 37 and about to lose one more. The Richmond Marriott West was picked up during ColSux’s mid-decade buying spree, when CEO William J. Yung was overpaying for assets right and left. The Kentucky hotelier recently unloaded another Richmond hotel for considerably less than its assessed value. As Yung’s rinky-dink empire continues to crumble, it’s nice to see that bad things do happen to bad people.

If we’ve learned anything from the closing of Bill’s Gamblin’ Hall & Saloon is that it’s never too early for the world’s oldest profession. As one reader wrote e-mailed us, “Nice to know that the last interior shot I’ll ever see of Bill’s is of two ‘working ladies.'”

Does “Winners Play Here!” mean that losers play somewhere else? If you think casino ad campaigns tend toward the stale, you’re not alone. Raving Consulting‘s Chris Archunde has some thoughts on the subject.