Will Gambling Stocks Break One Hundred Billion Dollars ?

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GBGC.com compiles an index of the worlds leading gambling stocks by market capitalisation. Currently the index is worth US$95bn. Will it reach US$100bn?

“Gambling stocks continue to outperform the Dow by a significant margin on the expectation that governments worldwide are deregulating their gambling laws,” says Warwick Bartlett of Global Betting & Gaming Consultants who compile the GBGC-50 index of leading stocks by market capitalisation.

International Game Technology (IGT) leads the surge with a market cap of U.S $16,214.3 up from U.S $7126.8 in only 12 months.

They are followed by MGM- Mirage in second place and Harrah’s Entertainment in third. The top three stocks in the GBGC-50 are all Vegas based.

In at fourth is Hilton International plc the London based hotelier. That managed the Hilton brand outside the U.S. The world’s largest bookmaker Ladbrokes now accounts for 59.4% of Hilton profits and qualifies for the first time to become a GBGC-50 stock.

Best performer over 3 months has been Aristocrat up 100% following key approvals from three gaming commissions in the US.

Worst performer over 12months is Churchill Downs down 12.24%.

The rise of U..K Sportingbet and Austria’s Bet & Win reflect the about turn of Internet betting profitability as more people go on line throughout the world.

The big question is sustainability will the index surge a further 5% to reach a total market cap of U.S $100 billion?

“ Probably will but where do we go from there?” said Warwick Bartlett GBGC’s lead partner.

“IGT is selling on a PE of nearly 40 which is quite demanding and in the UK William Hill is selling on a PE of 18 so its our view that we are in for a period of consolidation” said Warwick Bartlett

Leading GBGC Components by Market Cap 5 April 2003

    Company    Symbol    5 Apr 04(US$m)    5 Jan 04(US$m)    6 Oct 03(US$m)    7 Apr 03(US$m)    Position5 Jan 04

1    International Game Technology    igt    16,214.3    12,677.8    10,085.5    7,128.8    1

2    MGM-Mirage    mgg    7,792.5    6,402.9    6,105.8    4,920.9    2

3    Harrah's Entertainment    het    6,553.4    6,003.7    4,914.8    4,146.5    3

4    Hilton Group    hg.l    6,503.1    n/a    n/a    n/a    n/a

5    Mandalay Resorts    mbg    4,207.7    3,271.3    2,710.0    1,861.8    7

6    Caesars Entertainment     czr    4,042.3    3,573.3    2,970.0    2,197.8    4

7    William Hill    wmh.l    3,998.8    3,515.6    2,343.1    1,571.1    5

8    Rank Group    rnk.l    3,601.2    3,075.9    2,829.4    2,289.4    8

9    Tabcorp Holdings    tah.ax    3,592.0    3,370.7    3,110.0    2,391.4    6

10    GTECH Holdings Corp.    gtk    3,447.7    2,976.3    2,663.1    1,957.8    9

11    Wynn Resorts    wynn    2,835.5    2,148.9    1,450.8    1,248.4    10

12    Station Casinos    stn    2,719.5    1,793.6    1,858.2    1,233.5    11

13    Heiwa Corporation    6412.f    1,948.5    1,783.2    1,874.1    1,816.7    12

14    Tab Ltd    tab.ax    1,598.2    1,583.1    1,018.2    855.6    13

15    Boyd Gaming    byd    1,583.5    1,092.8    924.7    807.6    14

16    Alliance Gaming    agi    1,417.3    1,029.5    915.4    629.1    15

17    Aristocrat Leisure    all.ax    1,291.9    659.3    612.5    444.1    27

18    Scientific Games Corp    sgms    1,239.5    1,020.3    733.2    325.0    16

19    Stanley Leisure    sly.l    1,139.6    937.1    762.3    573.9    20

20    Penn Gaming    penn    1,118.2    947.6    867.8    725.6    19

21    Kerzner International     kzl    1,099.3    959.4    857.4    558.5    18

22    Argosy Gaming Co    agy    1,059.7    742.1    693.7    541.4    24

23    WMS Industries    wms    1,040.2    895.4    802.4    403.2    22

24    Aztar    azr    994.0    900.0    648.0    532.2    21

25    Ameristar Casinos    asca    956.0    713.2    702.9    350.8    25

Source: GBGC Analysis – gbgc.com

Corporate File

ü    There are now 23 gambling stocks around the globe with a market cap of in excess of US$1bn. Congratulations to Aristocrat Leisure (all.ax), Stanley Leisure (sly.l), Penn Gaming (penn), Kerzner International (kzl), Argosy Gaming Co (agy) and WMS Industries (wms) all of whose market caps have surpassed US$1bn during the past quarter. All members of the GBGC 50 now have a market cap of over US$100m, Monarch Casino (mcri) being the smallest component at US$138.1m. The average market cap is now US$1.867bn with International Gaming Technology (IGT) remaining by far and away the largest gambling stock on the planet with a market cap of US$16.2bn;

ü    Congratulations to William Hill (wmh.l) who joined the exclusive ranks of the blue-chip FTSE 100 on 1 April replacing Amersham due to the merger of healthcare group with US giant General Electric. The bookmaker, which listed on the London market in June 2002, has 1,586 branches in the UK as well as telephone gambling and interactive divisions. Pre-tax profits rose to £201.7m during the year to 30 December 2003 from £141.4m during the previous year;

ü    2004 is the 100th anniversary of the establishment of the Estate, the Trustees of Tattersall’s. On 5 April the Trustees of the Estate of the late George Adams have decided that Tattersall’s will progress towards an Australian Stock Exchange listing and surely make the GBGC 50 upon their entry;

ü    Welcome to Hilton (hg.l) who recently disclosed annual profits of £360.6m. Although this represented a slight fall from £361.4m during 2002 the Ladbrokes arm of the business accounted for 59.4% up from 41.3% the previous year making the stock eligible to join the GBGC 50. Hilton replaces Lottomatica (ltt.mi) who drop out of the GBGC 50 with a market cap of US$101.1m;

ü    MGM Mirage (mgm) upped its bid on 8 April to US$555m for London-based Wembley (wmy.l), owner of a Rhode Island dog racing track and video slot centre and greyhound tracks in Wimbledon, Manchester, Birmingham, Oxford and Portsmouth in the UK. In addition Wembley is the parent of Aurora, the Colorado-based Wembley USA, which owns one horse track and three greyhound racing tracks in Colorado. Under the terms of the bid MGM Mirage would pay US$15.46 for each Wembley share, up from its previous bid of US$490m. The higher bid was placed little over a week after BLB Investors made an offer of US$525m. On 5 April Wembley’s market cap was US$546.9m.

NB. Half of BLB Investors is owned by Starwood Capital, a real-estate investment firm affiliated with the company that owns the Westin and Sheraton hotel chains. The other half is divided between Kerzner International (kzl) and Waterford Group, companies that partnered in developing Mohegan Sun casino in Connecticut.

ü    On 8 April Great Canadian Gaming Corporation (gcd.v) announced that it had completed the purchase of Hastings Entertainment, through a wholly owned subsidiary 686486 BC Ltd., from Woodbine Entertainment Group. The purchase price was based on an enterprise value of Can$20.1m. Hastings Entertainment operates Hastings Racecourse, a landmark thoroughbred racetrack located in Vancouver;

ü    On 17 March Shuffle Master (shfl) announced a 3-for-2 stock split. The additional shares will be issued on April 16, 2004 to shareholders of record as of the close of business on April 5, 2004. Each shareholder will receive one additional share of Shuffle Master common stock for every two shares owned. The decision responded to the positive investor interest in Shuffle Master stock;

ü    During March by the Illinois Gaming Board selected Isle of Capri's (ISLE) US$518m bid to build a casino in Rosemont. However, just a couple of weeks later an investigation was announced Illinois Gov. Rod Blagojevich;

ü    On 11 March MTR Gaming Group (mntg) announced that its wholly owned subsidiary, Speakeasy Gaming of Fremont., completed its purchase of the assets of Binion's Horseshoe Hotel and Casino in downtown Las Vegas and entered into a Joint Operating License Agreement with an affiliate of Harrah's Entertainment (het) pursuant to which Harrah's will serve as the primary day-to-day operator of the property on an interim basis. The purchase price of the property is US$20m is subject to an increase of US$5m if, at the termination of the Joint Operating Agreement, Harrah's has achieved certain operational milestones. Separately, the Company purchased a parcel of ground for US$1.8m which was previously leased for US$232.5k per year. The Joint Operating Agreement will have an initial term of one year, which Harrah's may extend for up to an additional two years;

ü    On 9 March Aristocrat Leisure (all.ax) received key product approvals from the gaming commissions in three of the largest gaming jurisdictions in North America: New Jersey, Mississippi and Nevada, for games such as ‘Mr Cashman’, ‘King of the Nile’, ‘Wild Amazon’ and ‘Wild Cougar’;

ü    On 23 February Tabcorp Holdings (tax.ax), launched a fresh takeover bid for rival Tab Ltd (tab.ax) offering AUS$2.03bn. This new bid was anticipated following a five-month battle with Queensland-based UNiTAB who had placed a AUS$2.0bn bid on the table to beat Tabcorp's own initial offer of AUS$1.9bn. UNiTAB responded with a AUS2.1bn bid but New South Wales Racing accepted the Tabcorp bid rejecting UNiTAB's AUS$2.1 billion proposal. On 1 March New South Wales state government announced that it would be asking the state's racing authority to advise it of the means used to reject UNiTAB’s bid. Tabcorp cleared this regulatory hurdle but UNiTAB is still considering whether to respond by increasing its bid for Tab Ltd.

Notes to editors.

1.    GBGC is a specialist consultancy to the gambling industry.

2.    GBGC produced the twice-yearly Global Gambling Report some 700 pages on the global economy. Every major gambling corporation purchases it.

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Warwick Bartlett
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