Gaming stocks rise

Gary Thompson

Friday, Jan. 16, 1998 | 10:21 a.m.

Bullish win figures and takeover rumors prompted a buying spree in gaming stocks Thursday.

Mirage Resorts and Boyd Gaming shares jumped more than 8 percent, while nearly across-the-board gains for other casino companies pushed the GAX gaming stock index up nearly 2 percent.

By contrast, the Dow Jones Industrials fell 92.92 points, or 1.2 percent.

Mirage gained 1 13/16, or 8.4 percent, to close at 24 1/4 a share on volume of 2.1 million shares, almost three times its average daily trading volume of 779,863 shares.

Analysts believe Mirage and other Strip operators serving the baccarat market will post improved December quarter results. On Tuesday, the state Gaming Control Board said baccarat fueled a 15.1 percent jump in November gaming win along the Strip.

MGM Grand rose 1 5/16 a share, or 3.8 percent, while ITT, owner of Caesars Palace and the Desert Inn, posted a more modest gain. Off-Strip resorts that cater to baccarat players also fared well, with Hilton climbing 2.1 percent and Rio Hotel & Casino edging higher.

The November win figures may be hard to duplicate, as currency devaluations, exchange controls and economic turmoil in Asia are expected to result in a sharp decline in play from that region, which supplies about 70 percent of the big baccarat players Strip resorts covet.

The devaluations and economic woes have been well publicized, but the more recent and less-known currency restrictions imposed by some Asian governments could keep the area's credit players from transferring dollars to this country to pay off their debts.

As a result, casino operators -- who discount such debt up to 20 percent for the biggest credit players -- could face further discounting from payment in currencies losing value to the dollar.

The net effect is a reduction in the house percentage and greater risk of significant casino losses, which are payable in dollars, in an already highly volatile game.

Operators serving the locals markets also fared well in Thursday's stock trading. Boyd jumped 56.25 cents, or 8.8 percent, to close at 6 15/16 on double its normal daily trading volume.

Station Casinos, which reported a 75 percent drop in December quarter earnings Thursday, nevertheless posted a 37.5-cent, or 3.4 percent gain, in its stock price on normal trading volume.

Among gaming suppliers, IGT, which reported flat per-share results, lost 50 cents a share, or 2 percent, while Anchor Gaming, which reported sharply higher earnings after the close of trading, closed up 1 3/4 to post a 2.9 percent rise in its stock price.

Late Thursday, Anchor said December quarter net income jumped 95 percent to $16 million, or $1.20 a share, from $8.2 million, or 60 cents a share, on a 50 percent revenue increase to $53.5 million from $35.7 million in the year-earlier quarter.

For the first half of its fiscal 1998, Anchor reported net income doubled to $32.7 million, or $2.45 a share, from $16.5 million, or $1.21 a share, on a revenue gain to $108 million from $70.7 million.

The results reflect the 22nd consecutive quarter for which Anchor has reported higher revenue, net income and earnings per share. One of the more volatile gaming stocks, Anchor shares traded as low as $43 a month ago and were in the mid-$80s two months ago. They closed Thursday at $61.625, up $1.75.

Shuffle Master posted the biggest percentage gain of the day, jumping 11.5 percent to close at 7 7/8, up 81.25 cents, on more than double its normal trading volume.

Circus Circus Enterprises gained 3/8, or 2.1 percent, to close at 24. Takeover rumors and a reported rift among Circus executives over the company's strategic planning have Wall Street speculating the company might sell off some underperforming assets or convert to a real estate investment trust.

Though Circus declined to comment, the company is considering hiring John Marz -- a founder and principal of the state's second-largest public relations firm, DRGM -- to take over the marketing of the company's properties.

A 10 percent jump in citywide room inventories over the past year and flat visitor volume growth since mid-summer have resulted in declining room occupancy rates and prices at many Las Vegas resorts.

Shares of Circus, which has spent hundreds of millions of dollars expanding room capacity at Circus Circus Las Vegas and the Luxor and is building the 4,000-room Project Paradise south of the Luxor, have slumped from the mid-$30s to the low $20s as Wall Street concerns about market saturation have grown.

The stock has edged higher in the past few days as speculation about pending management changes and asset sales or conversion to REIT status have circulated among big investors.