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Think there are no catalysts for the slot guys after this run up in the stocks?

We are now entering that time of year where the state legislatures “fix” their budgets.  Their options:  a) raise taxes, b) cut spending, c) postpone the pain via accounting tricks and debt, or d) legalize/expanding gaming.  Republicans don’t like a) and haven’t been good at b), Democrats abhor b), which leaves c) they all do all of this, and d) is a more likely option this year and next.

Dare we say that gaming is now the more politically palatable option?  In many cases, this is true.  In this politically charged atmosphere, gaming legalization/expansion may be the easiest road to raising revenues that both Democrats and Republicans can get behind.

This is not a new theory.  Historically, we’ve seen gaming expansion in times of big state budget deficits.  New and expanded markets are a big part of the 3-5 year bull thesis on slot suppliers.  With the new year upon us, we are now entering the legislative season in many states and budgets need fixing.  We think the upcoming headlines will be positive for slot suppliers.  This is why we found the recent downgrades by Goldman and JPM interesting.  With expectations fairly low and estimates looking reasonable, there shouldn’t be any negative surprises.  Headlines could drive the stocks over the near term.

We count as many as 11 states that are considering some sort of gaming expansion in 2011 and while most might not pass this year, most will expand over the next few years.  Here is the list:

Delaware

Bill: HB 194--3 gaming venues--Del Pointe Resort and Racino in Millsboro; Old Georgetown harness track off Route 9; Delmar International Speedway off Route 13 in Delmar

Est Slots: 6,000

Status: House Gaming and Parimutuels Committee to decide bill hearing date

Timing: 2011

Convene Session Date: Jan 11, 2011

Adjourn Session Date: June 30, 2011

Florida

Bill: 4-5 Las Vegas-style casinos in Miami, Tampa, and 3 other locations; 8-10% tax rate; possible developers: LVS, CZR, MGM, PENN, GENTING

Est Slots: +8,000

Status: Bill sponsored by Sen. Dennis Jones (R) will be ready in late January; "50-50 chance of Legislature approving casino games this year"--Senate President Mike Haridopolos

Timing: 2011; earliest date for casino opening is 2015

Convene Session Date: Mar 8, 2011

Adjourn Session Date: May 6, 2011

Illinois

Bill: 4 riverboat casinos: 3 near Chicago, 1 in Danville; 4,000 position land casino in Chicago; 1,200 slots at 4 tracks near Chicago; 900 slots each at two St. Louis area tracks; Existing casinos to expand from 1,200 to 2,000 gaming positions in 400-position increments

Est Slots: 7,000

Status: Stalled in the House on Jan 11; process would need to begin all over

Timing: June/July 2011

Convene Session Date: Jan 12, 2011

Adjourn Session Date: Meets year-round

Kansas

Bill: HB 2002--casino and racetrack slots in Southeast Kansas

Est Slots: 1,500

Status: In current form, unlikely to pass given the large GOP majority in both Houses; 1) minimum casino investment at $100MM, 2) slot payout at 58%

Timing: 2011

Convene Session Date: Jan 4, 2011

Adjourn Session Date: Late May 2011

Massachusetts

Bill: 3 resort casinos, 2 racetrack slot parlors (Casino resorts located in Western, central and Greater Boston areas; likely racetracks--Plainridge Racecourse, Raynham Park)

Est Slots: 5,000

Status: Passed state legislature in August but Gov Patrick disapproved of slots at tracks. Revisions expected this year.

Timing: 2011

Convene Session Date: Jan 5, 2011

Adjourn Session Date: Meets year-round

 

Maryland

Bill: Slots at Prince George's County's Rosecroft harness racing track

Est Slots: 750

Status: Very preliminary; needs House and Senate approval

Timing: Referendum Nov 2012

Convene Session Date: Jan 12, 2011

Adjourn Session Date: Early April

Minnesota

Bill: Racino Act--slots each at Canterbury Park and Running Aces; Governor Mark Dayton proposed Mall of America casino

Est Slots: 4,000

Status: Sen. Dick Day (R) says the Racino Act is still shy of 20 votes in the House.

Timing: 2011

Convene Session Date: Jan 4, 2011

Adjourn Session Date: May 23, 2011

 

New Jersey

Bill: 2 boutique casinos

Est Slots: 2,000

Status: Waiting for Gov Christie's signature

Timing: Jan/Feb 2011

Convene Session Date: Jan 12, 2011

Adjourn Session Date: Meets year-round

 

New York

Bill: Mohegan Sun-style casino in the Catskills; to be operated by Stockbridge-Munsee Band of Mohicans

Est Slots: 5,000

Status: Secretary of the Interior Ken Salazar has 45 days to approve or reject the gaming compact. If he takes no action, the gaming compact becomes binding.

Timing: Feb 2011

Convene Session Date: Jan 5, 2011

Adjourn Session Date: Meets year-round

 

Ohio

Bill: Slots at 7 racetracks

Est Slots: 17,500

Status: Passed Legislature and ready for implementation but facing outside legal issues (Ohio Supreme Court/ Let Ohio Vote.org). Gov Kasich is looking over slot proposal and will decide whether to seek a court order to determine authority over the matter.

Timing: 2011

Convene Session Date: Jan 3, 2011

Adjourn Session Date: Meets year-round

 

Texas

Bill: 4 "destination resort" casinos (Dallas, Harris county, Bexas county, South Padre Island); Slots at 13 racetracks and 3 federally recognized Indian reservations;

Est Slots: +15,000

Status: Texas Gaming Association expects to release financial projections in late Jan. No planned date for introduction of bill.

Timing: 2011

Convene Session Date: Jan 11, 2011

Adjourn Session Date: May 30, 2011