Casinos Still Like Odds

Assuming everything goes smoothly, Rose expects the first slot machines to begin operating in south Florida in the middle of 2006. Isle of Capri would likely open a temporary facility with 1,500 slot machines at that time, followed by a permanent casino by the middle of the next year. In such a scenario, Isle of Capri could earn an additional $30 million to $35 million in its 2007 fiscal year, which begins in May 2006, according to Rose. (J.P. Morgan does and seeks to do business with companies covered in its research reports.)

Across the country, in California, voters overwhelmingly opposed two initiatives that would have expanded gambling. More than three-quarters of voters rejected Proposition 70, which would have allowed Native American tribal casinos to operate an unlimited number of slot machines and would have given them exclusive rights to casino-style gaming. Proposition 68, opposed by 84% of the electorate, would have allowed card clubs and racetracks to operate slot machines if tribes refused to pay 25% of slot revenue to the state.

The defeats were likely negative for gaming-equipment makers. Nevertheless, Wall Street had expected the results.

"With the defeat of both propositions, tribes in California are likely to continue negotiating/renegotiating individual compacts with the governor," wrote Michael Rietbrock, a Citigroup Smith Barney analyst, in a research note. "The defeat is a slight positive, albeit temporary, for regional gaming markets in Nevada such as Reno, Tahoe and Primm that rely on California as a feeder market. While Propositions 68 and 70 would have been opportunities for the gaming-equipment manufacturers, investors had anticipated the defeat, in our view." (Citigroup does and seeks to do business with companies covered in its research reports.)

In Oklahoma, voters said "yes" to Question 712, which permits three racetracks to install electronic games and allows tribal casinos to install "skill games" such as video poker. The result is likely to help electronic game makers.