AGEM Index

The AGEM Index reported a month-to-month increase for the second consecutive month in August 2013. The composite score was 180.30, up 3.07 points (+1.7 percent) when compared with July of 2013 and up 57.61 points (+46.9 percent) when compared with the same month a year ago. The index has reported month-to-month declines in just two of the past eight months. In the latest reporting period, 10 of the 18 global gaming suppliers reported monthly increases in stock price. Of the eight operators that reported declines, only one was down by more than 10 percent. Note, the AGEM Index now incorporates the performance of Crane Co. (CR), an industrial products manufacturer whose operations also include software, online solutions and gaming payment tools.

The AGEM Index increased in August while broader stock markets did not fare as well, with each witnessing month-to-month declines. NASDAQ reported the least decline among broader indices, falling 1 percent from the end of July to 3,589.87. The S&P 500 fell 3.1 percent to 1,632.97. The Dow Jones Industrial Average witnessed the greatest monthly decline of the three, falling 4.4 percent to 14,810.31.

Selected positive contributors to the August 2013 AGEM Index included the following:

Ainsworth Game Technology (AGI) reported a stock price of AU$4.06, up 12.8 percent, and contributed 1.13 points.
With a stock price of AU$4.52 (+4.2 percent), Aristocrat Technologies (ALL) contributed 0.92 points.
Selected negative contributors included the following:

Crane Co. (CR) contributed negative 1.16 points, due to a 5.7 percent decline in stock price to $57.41.
Intralot S.A. (INLOT) reported a stock price of €1.51, down 12.7 percent, and contributed negative 0.26 points.
A number of gaming equipment manufacturers continued to report positive earnings in the latest reporting period while consolidation has emerged for a few manufacturers. Selected results are noted below.

WMS Industries (WMS) reported net revenues of $202.8 million in its fiscal fourth quarter of 2013, up 3.5 percent from the same period a year ago. The latest performance is primarily attributable to a 32.8-percent increase in gaming operations revenues. However, the increase was offset by a 10.3-percent decline in product sales revenues, which fell to $119.4 million. Although new unit shipments to the U.S. and Canada increased 1.5 percent year-over-year and new unit shipments to international markets increased 39.4 percent, used unit shipments declined 66.2 percent. Total unit shipments fell 12.7 percent to 7,698; the average sales price per new unit fell 3.4 percent to $15,443. WMS Industries is in the process of being acquired by Scientific Games.

Bally Technologies (BYI) reported a 7.6-percent increase in net revenues to $264.4 million during the company’s fiscal fourth quarter of 2013, due to substantial increases in gaming operations and systems revenues. Gaming operations revenues increased 9.7 percent to $102.8 million, due to a 38 percent increase in the installed base of WAP games. Meanwhile, systems revenues increased 31.8 percent to $72.9 million, partially attributable to a 25 percent increase in maintenance revenues. Gaming equipment revenues declined 8.4 percent to $88.7 million, primarily attributable to fewer casino openings. New gaming devices declined 7.7 percent to 4,911, while the new unit average selling price fell 5.6 percent to $16,224.

Net revenues for SHFL entertainment (SHFL) increased 16 percent during the company’s fiscal third quarter of 2013 to $73.5 million. Each revenue source reported increases from the same period a year ago, with electronic table systems revenues reporting the greatest year-over-year increase of 78.8 percent. Electronic gaming machines revenues increased 16.1 percent to $23.2 million due to increases in placements in Asia and the average selling price. Utility revenues witnessed the least year-over-year increase, rising 5.2 percent to $25.6 million. The latest performance is attributable to an 11 percent increase in shuffler sales.

On Aug. 27, 2013, Bally Technologies’ proposed acquisition of SHFL entertainment moved one step closer to completion. The companies announced the completion of the waiting period required under the Hart-Scott-Rodino Antitrust Act of 1976 without the Federal Trade Commission raising any concerns. The transaction is still awaiting approval from SHFL’s shareholders and the necessary regulatory agencies.

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