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