Coverage initiated on slot maker by Goldman Sachs

Tuesday, May 15, 2001 | 10:32 a.m.

Goldman Sachs gaming analyst Steve Kent initiated coverage on WMS Industries Inc. at "market outperform," apparently touching off a small rally in the slot maker's shares Monday.

Kent set a 12-month target of $24 for the Chicago-based slot manufacturer, a 17 percent premium over Friday's closing price of $20.51. Kent projected earnings per share would increase 31 percent to $1.46 for the fiscal year ending in June, followed by a 17 percent increase in fiscal 2002.

In his report, Kent based a bullish outlook for WMS on the expected strength of the slot machine replacement market over the next several years, driven by new technology, more appealing slots and coinless technology. Kent also noted that more than half of slot managers surveyed indicated they planned to increase the number of slots on their gaming floors over the next year.

"WMS ... should show sustained earnings growth over the next few years, as the replacement cycle of slot machines accelerates and WMS capitalizes on numerous expansion opportunities," Kent wrote.

Possible new avenues for growth for WMS, Kent wrote, include the introduction of a video poker product, the rollout of eight new participation slot machines, expansion into the international market and the introduction of new "wide-area progressive" slot systems based on WMS' joint venture with International Game Technology.

WMS closed Monday at $22.50, up $1.99.