AGEM Index

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The AGEM Index moved modestly upward in the middle of the second quarter earnings season. The composite score of 17 global gaming suppliers gained 1.68 points, reaching a value of 90.57 by the close of July 2010. The latest positive turn is welcome after falling sharply by 12.61 points and 14.69 points in May and June, respectively. For comparison purposes, the 1.89-percent gain in the AGEM Index was undersized by the broader equities markets, which closed significantly higher for the month, with the Dow Jones Industrial Average and Standard and Poor’s 500 Index expanding 7.1 percent and 6.9 percent, respectively.

Smaller-than-expected gains from taxable retail sales to additional reductions in consumer confidence, economic recovery continues to feel like a recession to many sectors, including gaming and leisure. As long as consumer spending increases are slower-than-expected and gaming revenue remains soft in many jurisdictions nationwide, it is likely that capital expenditures for replacement sales will be slim for a while longer.

Selected positive contributors to the index during the month included:

• Lottomatica (LTO) recorded an increase of 7.26 percent in its stock valuation, adding 2.01 points to the index.
• INTRALOT S.A. (INLOT) contributed 1.46 points to the index based on a 29.77-percent gain in its stock price.

Selected negative contributors to the index included:

• International Game Technology (IGT) witnessed its stock price fall 2.93 percent, contributing -0.71 points to the index.
• Global Cash Access (GCA) posted a 43.00-percent decline in its stock valuation, contributing a negative 0.62 points to the index.

As economic recovery moves at a slow pace, investors, potential gaming operators and voters are somewhat mixed about the direction of casino gaming in several markets.
In July, reports from Moody’s Investor Service indicated that a “high degree of uncertainty” remains in the gaming market, while Deutsche Bank noted in their own report that U.S. casinos were “bumping along the bottom.”

In the Catskills of northern New York, at one of only five sites in the country to receive approvals needed to allow off-reservation gaming, the St. Regis Mohawk tribe failed to reach an agreement with developers to build a casino at the Monticello Raceway.

Further in the development stage, Harrah’s Margaritaville Casino in Biloxi remains stalled as the operator noted that the site will be maintained as they “evaluate options.”
Casino expansion in Michigan has come to halt as a ballot initiative failed to gather the nearly 400,000 signatures required to allow voters to decide if seven additional corporate casinos could operate in the state.

In Massachusetts, the legislature sent a gambling bill to Gov. Deval Patrick just before midnight on July 31, the last day of the session. The bill, if it was not vetoed, would have created three casinos and allowed slots at two racetracks. The governor sent an amended bill back to legislators, which removes the approval for two slot machine facilities.

Based on a judicial ruling, voters in Maryland will decide in November whether they want a slot parlor near Arundel Mills Mall. The planned site was to have 5,000 slots.

Voters in the city of Richmond, Calif., will also go to the ballot box to determine if they want to open a full-scale casino at Point Molate.

Gaming expansions are moving forward in several other states. Kansas received applications from three developers to build a state-owned casino near Wichita. The deadline to review and negotiate contracts is Oct. 20. Penn National Gaming released details of its planned Hollywood Casino in Columbus, Ohio. The $400 million casino will hold nearly 3,000 slot machines, 70 table games and 30 poker tables.

On the international front, Intercity Group announced its plan to begin construction of a $400-million casino near Cambodia’s Angkor Wat temples in October.

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