By William Spain
Shares of gambling-equipment makers were on the rise Tuesday
after Illinois Gov. Pat Quinn signed a bill that could bring tens
of thousands of video poker machines to bars and restaurants in the
state.
The gambling expansion - the state already has racetracks and
"riverboat" casinos - is part of an effort to pay for a $31 billion
public-works program. Other funding will come from raising taxes on
liquor, candy and other products.
Under the measure, bars, restaurants that serve liquor, social
clubs and truck stops can have up to five machines. The state gets
30% of the take, which some estimates put at $300 million a year
once in place. The Illinois Gaming Board has about two months to
come up with regulations.
News of the signing sent shares of International Game Technology
(IGT) up 5.2% to $15.61. Chicago-based WMS (WMS) was up 4% at
$33.79 and Bally Technologies (BYI) gained almost 6% to $31.81.
The exact number of machines to be installed is unclear;
municipalities retain the power to restrict them and they can also
be rejected by local voter ballot measures.
With the state's estimated 15,400 liquor licenses, there could
be a market for as many as 77,000 new gambling devices, according
to a research note by Joe Greff of J.P. Morgan.
"However, we think the 'real' market size for video gaming
devices at these pubs is [about] 40,000," Greff wrote. "This
estimate is more than the number of slots at the current riverboat
casinos."
However, "we think there will be additional regulatory oversight
for this expansion so we think the earliest for new shipments would
be calendar 2010," he added.
Greff noted that since most if not all of the new machines will
be video poker and/or black jack machines, "we believe IGT will be
the largest benefactor of the three gaming suppliers" with a likely
60%-plus share.
It has been a good week for slot machine makers: On Monday, Ohio
Gov. Ted Strickland issued a directive telling the Ohio Lottery
Commission to begin rule-making to place as many as 2,500 slot
machines at each of the state's seven racetracks.
-By William Spain; 415-439-6400; AskNewswires@dowjones.com