The AGEM Index ended the month of January 2010 at 102.88, dipping 3.44 points or 3.23 percent from the previous month and falling back to a level not seen since July 2009. The AGEM Index has been in tow with the broader S&P 500 Index over the last few months, which also slid 3.7 percent during the month of January 2010. However, it is important to note the extent of movement in the index relative to the latest downturn in the business cycle. The AGEM Index remains down 32.2 percent since it reached its zenith of 151.84 at the beginning of the recession in December 2007, but reversibly, it has gained nearly 55.2 percent from when it closed at 66.30 12 months ago. While market confidence has edged upward from its abyss, the timing for valuations approaching pre‐recessionary levels will be slowed by investor caution. The global gaming suppliers’ ability to continue investing in innovation and diversification of new product lines while maintaining strong balance sheets will be key considerations going forward.
Selected positive contributors to the index during the month include: (1) Global Cash Access (GCA) with the largest contribution, adding 0.26 points to the index based on an 8.14‐percent increase in its stock price and (2) Shuffle Master (SHFL) contributing 0.21 points with a 7.89‐percent increase in its stock performance.
Selected negative contributors to the index include: (1) INTRALOT S.A. (INLOT) with its stock price dropping 21.95 percent, contributing ‐0.93 points to the index and (2) WMS Industries (WMS) posting ‐0.88 points to the index with a 7.30‐percent decline in its stock valuation.
While we continue to note that new markets will drive valuations, which we have recently seen through favorable gaming legislation, it is important not to lose focus on consumers in existing markets, where leisure and business travel remain remarkably down. These areas will be closely watched during 2010.
Union Gaming Group Analysis
Gaming supplier shares couldn’t overcome a difficult January macro. Fears around a double‐dip recession abounded as stimulus capital wore off. The market grew incrementally concerned about 4Q09 results (broader market and gaming in particular), while fears on sovereign credit (Greece, Portugal, Euro zone) began to infiltrate sentiment.
Gaming sector activity was mixed during the month. Pennsylvania passed its gaming table bill; Kentucky filed multiple gaming bills with the governor’s support; four additional proposed casinos met financial deadlines in Iowa; Delaware advanced a table measure; Illinois’ 10th casino license received local planning approval; Calder represented the second Miami‐Dade casino to open in the county; and the prospect of racino approvals in Ohio appeared greater given ballot initiative dynamics.
At the same time, Florida officially rejected the Seminoles compact proposal; Delaware voted against casino expansion in the state; Indiana’s land-based casino proposal was shot down; and Missouri decided to yank Pinnacle’s president casino license.
Market data improved in Las Vegas with November and December (delayed) visitation and airlift statistics showing growth along with Consumer Electronics Show (CES) attendance up a resounding 6 percent during the period.
Macau’s gaming revenue continued to grow at a blistering pace, along with continuation of momentum in Asian gaming given a partial opening of Genting’s Resort World Sentosa (RWS) in Singapore and the publication of Junket rules by the Casino Regulatory Authority (CRA) in that market.