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Sector Snap: States May Use Gaming To Plug Budgets

The Associated Press

NEW YORK (AP) — Some states looking for ways to plug their budget holes during the recession may turn to casinos — which could benefit casino equipment suppliers, a Goldman Sachs analyst said Tuesday.

With the majority of states facing a 2009 budget deficit of $2.2 billion, on average, Steven Kent suspects many will consider expanding casino operations as a way to generate more money.

Such a move would help casino equipment makers, since any new or expanded venue would need machines for the property. But casino operators may see their business weaken, Kent explained, since expanded operations could infringe on existing properties.

"The problem for the regional casinos is that the U.S. is more saturated now and the companies are fairly diversified so that expanded gaming in one state could cannibalize gaming in another state," the analyst wrote in a client note.

Kent predicts seven states may try to legalize slot machine gaming while three others attempt to expand theirs.

He recommends investors buy Bally Technologies Inc. and WMS Industries Inc. as well as lottery provider Scientific Games Corp., as some states may also look to expand their lottery efforts.

Shares of Bally Technologies shed 7 cents to $18.21 in midday trading, while WMS's stock fell 60 cents, or 2.7 percent, to $21.41. Shares of Scientific Games slid 70 cents, or 4.6 percent, to $14.41.