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IL approvals chugging along, albeit at a slowing pace

Today, the Illinois Gaming Board (“IGB”) released a list of all licensees, which included 1279 licensed establishments, implying the approval of 136 incremental establishments, a deceleration from January and December.  The February approvals compare to 188 in January and 350 grants in December.  To date, there have been no establishment licenses revoked and 91 establishments have been denied licensure.  There has been one terminal operator who had its license revoked along with 22 terminal operators and 1 manufacturer that have been denied licensure.  Currently, there are 2,596 establishments pending approval, a 4% increase from January.

Each location can have a maximum of 5 machines so 1,279 approved locations imply a current maximum market size of 6,395.  There were 3,394 machines online in January, up from 2,290 in December.  VGT revenue in January rose to $9.78 million from $7 million in December.  It looks like average win per day in January was around $115/day.

We stand by our prior estimate of a 10,000 unit market by the end of 2013.  We expect that most of the VLT sales (upwards of 75%) will come with some sort of financing, but the vast majority will be accounted for as for-sale machines.

Our understanding is that ASPs should be around $12k range.  We believe that distributors receive a 10-15% cut of the purchase price as their commission, with the big suppliers paying on the low end of that range and some of the smaller guys paying at the higher end of that range.  Typically, distributors take the machines on a consignment basis, meaning that suppliers cannot recognize revenues until the machines are placed in the establishments.

DETAILS ON PENDING APPLICATIONS:

Distributor:  3

Manufacturer:  3 (including Speilo and Konami)

Supplier:  3

Technicians:  21

Terminal handlers:  143

Terminal operators:  11

Establishments:  2,596 pending