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Casino Stocks: No Reason T0 Fold


Personal Business: Smart Money

CASINO STOCKS: NO REASON T0 FOLD

Place your bets: Do any jackpots remain among gaming stocks? After all, the group has been dishing out winnings for two years, and some market watchers think it's too late to get in. Several gaming stocks carry weighty multiples, and many analysts worry about an oversupply of venues. Six states now have or will soon allow riverboat or dockside casinos. Some 150 Native American tribes in more than 20 states have signed or are negotiating casino gaming compacts. And in Las Vegas, Circus Circus Enterprises, Mirage Resorts, and MGM-Grand will soon launch grandiose new theme-park casinos.

Yet odds are the public's insatiable appetite for gambling can elevate some stocks. Nowadays, parents can take the kids along on a gambling vacation. That's a key reason some analysts believe Luxor and Grand Slam Canyon, the two new Circus Circus properties, should help propel the company's shares, which have lagged recently. In Vegas, many also favor Caesars World, a leader among high rollers yet one of the cheapest gaming stocks around. Its recent price-earnings ratio was 14. Caesars has scored with Forum Shops, a huge mall situated next to the casino.

Shares of Promus, a casino entertainment and hotel company, are trading at dizzying multiples--its p-e ratio (on trailing earnings) is 86. Yet Morgan Stanley analyst Kurt Feuerman remains a bull. He figures earnings will reach $2.10 a share next year, up from an estimated $1.20 in 1993. Promus is wagering on land-based casinos (Harrah's), riverboats, and Indian gaming. The company holds a 20% stake in Sodak Gaming Supplies, which distributes slot machines made by International Game Technology to Native American casinos. IGT is the market leader in slots--and another pricey stock on Feuerman's buy list.

HEAVY TRAFFIC. Since last fall, a dozen new public gaming companies have been born, with many far outpacing the rest of the market in initial public offerings. But the stocks have been volatile. Michael Mueller, an analyst with Montgomery Securities, fancies Primadonna Resorts, a recent IPO. The company owns the Whiskey Pete's and Primadonna casino hotels, on either side of Interstate 15 in Stateline, Nev. Already, about a quarter of the cars cruising the California-to-Vegas highway have been stopping at one of the resorts, and Mueller expects the number to rise once the new Las Vegas attractions are completed. Primadonna claims another lucky advantage: Motorists who have to use the bathroom must walk through the casinos to get there. RANDALL ENOS

BETTING ON GAMING STOCKS

Company Stock Price/ Est. 1993-1994

price* earnings* earnings per share

CAESARS WORLD 431/2 14 $3.31-3.62

CIRCUS CIRCUS 371/4 26 $2.57-3.41

INTL. GAME TECH. 345/8 40 $0.78-1.07

MIRAGE RESORTS 443/4 36 $2.02-3.14

PROMUS 581/2 86 $1.15-1.80

*Trailing 12-month earnings as of 8/2/93

DATA: GAMING & WAGERING BUSINESS/RAYMOND JAMES, INFOVEST

Edward Baig


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