AGEM Index

After two consecutive months of increases, the AGEM Index declined in October 2012. The composite index reached 128.23, down 0.61 points, or 0.5 percent, when compared to the prior month. Overall, the sector remains somewhat volatile as the index has declined in five of the past 12 months, yet remains up 3.6 percent from the same month one year ago. Within the sector, global gaming operators reported mixed results during the month, with eight of the 17 reporting month-to-month increases in stock price. Above-average gains were generally reported by manufacturers traded on exchanges outside of the United States. Meanwhile, of the nine operators facing declines in stock prices, five fell by 5 percent or more.

The broader stock markets witnessed a similar directional trend during the month. The Dow Jones Industrial Average reported a closing price of 13,096.46, falling 2.5 percent since the end of September. The S&P 500 reported a 2 percent decline, falling from 1,440.67 to 1,412.16. Meanwhile, NASDAQ reported the greatest decline of the three; the market fell 4.5 percent, from 3,116.23 to 2,977.23.

Selected positive contributors to the October 2012 AGEM Index included the following:

• Aristocrat Technologies (ALL) reported a stock price of AUD$2.82, up 4.8 percent, and contributed 0.70 points to the index.
• Konami (KNM) contributed 0.45 points to the index with a 2 percent increase in stock price to $23.10.

Selected negative contributors included the following:

• With a stock price of €16.55, which is down 3.3 percent, Lottomatica (LTO) contributed negative 0.98 points to the index.
• SHFL entertainment (SHFL) contributed negative 0.57 points, due to its 10.6 percent decline in stock price to $14.13.

The legalization of Internet poker continues to be the most talked about subject in the gaming industry, as a number of companies continue to move through the licensing process. It is unlikely federal legislation will be passed this year to legalize online poker in the United States. However, some states, such as Nevada, Delaware and New Jersey, are in the process of allowing some forms of interactive gambling within their borders.

In June of this year, Bally Technologies (BYI) and International Game Technology (IGT) were granted the first online gaming licenses in Nevada. Throughout the remainder of the summer, the State Gaming Control Board also issued licenses to South Point Poker LLC, Global Cash Access Holdings Inc. (GCA), SHFL entertainment Inc., American Casino & Entertainment Properties LLC, PokerTrip Enterprises Inc., Monarch Interactive Inc. and WMS Industries (WMS). This month, three more licenses were issued to Boyd Gaming (BYD), Fertitta Interactive and Golden Nugget.

Based on their arrangements established back in October of last year, Boyd Gaming plans to operate an online poker website with; MGM Resorts International (MGM) maintains a similar arrangement. However, must be licensed before the site is launched, which is not expected until early next year. Boyd Gaming expects to add 20 to 30 employees to its online poker team as a result of the expansion.

Fertitta Interactive, which includes the owners of Station Casinos and operators of Ultimate Fighting Championship, plans to launch its Ultimate Gaming site once the technology is approved. The company expects to expand from 26 to 100 employees by next year.

The Golden Nugget is planning to launch a site through its partnership with Bally Technologies. The site will be operated using Bally’s system, while the casino will provide the branding.

Major casino operators Caesars Entertainment (CZR), MGM Resorts International and Wynn Resorts (WYNN) have also submitted applications for online poker licenses, but none have been approved as of yet. However, MGM Resorts believes it will soon be granted a license to operate its planned site with and others are likely to follow suit.

This emerging sector within the gaming supplier segment of the market is expanding at a rapid clip and is expected to account for an increasing share of the overall gaming market in the years to come.

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