5 Casino Stocks to Bet On in 2012

NEW YORK (TheStreet) -- In its latest report, Fitch Ratings forecasts that casino operators and gambling firms in 2012 will experience varying levels of success in continuing expansions of margins and paying off debts.

Meanwhile, global casino gaming revenues around the world will grow at a 9.2% over the next five years, rising from $117.6 billion in 2010 to $182.8 billion by 2015, PricewaterhouseCoopers projects. During this period, spending in the U.S. will rise by 5% to $73.3 billion from $57.5 billion in 2010.

The latest edition of Global Gaming Outlook analyzes that the casino and gaming industry revenue will grow at an 18.3% from $34.3 billion in 2010 to $79.3 billion by 2015.

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A consensus of analysts surveyed by Bloomberg estimate 30% to 74% upside for these five stocks. Among analysts covering these stocks, an average of 72% issued buy recommendations.

The stocks are listed in ascending order of upside potential.

5. International Game Technology ( IGT) makes computerized gaming systems for markets worldwide.

Of the 23 analysts covering the stock, 61% recommend a buy and 35% rate a hold. A consensus forecast of analysts polled by Bloomberg has an average 12-month price target of $20.36 for the stock, about 28.3% higher than the current price.

In its fourth-quarter fiscal 2011 operating results, IGT reported a 14% increase in revenue to $539.8 million from $474.2 million in the same quarter last year, generating 52% from gaming operations and 48% from product sales. Net income for the quarter surged 168.3% to $53.4 million, or 18 cents per diluted share, which compares to $19.9 million, or 7 cents per diluted share, in the prior year's fourth quarter.

For fiscal year ended Sept. 30, total revenue increased 2% to $1.95 billion from $1.92 billion last fiscal. Net income for the period increased 52.4% to $283.6 million, or 94 cents per diluted share, compared to $186 million, or 62 cents per diluted share, in 2010.

The company has declared a quarterly cash dividend of 6 cents per share payable Jan. 6, 2012 to shareholders of record Dec. 22. For fiscal year 2012, the company estimates its adjusted earnings from continuing operations to come in the range of 93 cents to $1.03 per share.

Recently, IGT announced that the Pennsylvania Gaming Control Board has approved its sbX casino management system for use in casinos across the state. The company recently announced the installation of its sbX system at Fantastic Casino Alb Rook, a CIRSA property, located in Panama, providing the casino on-demand access to more than 300 titles in the IGT Game Library -- the industry's largest game-to-system game library -- and an option to reconfigure a casino floor with the touch of a button.

4. Las Vegas Sands ( LVS) is a leading developer of resorts with gaming and entertainment features. Through its majority-owned subsidiary Sands China, the company also owns a suite of properties in Macau.

Of the 29 analysts covering the stock, 79% recommend a buy and 17% suggest a hold. The stock's average 12-month price target is $58.50, or 43.4% higher than the current price, according to a Bloomberg consensus.

For the third quarter of 2011, LVS reported net revenue of $2.41 billion, up 26.2% from $1.91 billion in the same quarter prior year. Net income attributable to shareholders increased 110.5% to $353.6 million from $168 million in the third quarter of 2010, while diluted earnings per share increased 109.5% to 44 cents from 21 cents in the prior-year quarter. The company paid a final quarterly dividend of $2.5 per share on Nov. 15.

Consolidated adjusted property EBITDA increased 43.2% in the third quarter to $924.1 million from $645.2 million in the year-ago quarter. The EBITDA margin also increased 460 basis points to 38.4% in the third quarter from 33.8% in same quarter last year.

LVS is planning to build a $2 billion tourism complex in Ho Chi Minh City, which will be an integrated resort comprising of hotels, restaurants, exhibitions, conferences, a shopping center and other entertainment and recreational facilities, according to a Vietnamese state media reports citing the company's chairman Sheldon Adelson. Currently, LVS is also constructing a 6,400-room complex at the Cotai Strip, featuring the Sheraton and St. Regis hotel brands.

3. MGM Resorts ( MGM) owns and operates casino resorts. The company has a 51% interest in MGM China Holdings and MGM Macau and has other significant holdings. It owns and operates 15 properties located in Nevada, Mississippi and Michigan and has a 50% stake in three other properties in Nevada and Illinois.

Of the 29 analysts covering the stock, 69% recommend a buy and 24% suggest a hold. The stock's average 12-month price target is $15.68, or 68.8% higher than the current price, according to a Bloomberg consensus.

For the third quarter of 2011, MGM reported total net revenue of $2.23 billion, up 42.9% from $1.56 billion in the same quarter last year. The third quarter showed improved earnings, with net loss decreasing by 61.2% to $123 million from a loss of $317 million in the same quarter previous year. Room revenue from wholly owned domestic resorts increased 11%, with a 13% increase at the company's Las Vegas Strip resorts.

With Nevada gaming revenue increasing 8.1% in October, MGM Resorts said in its conference call that it was one of the best profit-to-cash flow months of the year, reports J.P Morgan gaming analyst Joe Greff.

MGM announced an online poker agreement with bwin.Party Digital Entertainment, the world's largest publicly traded online gaming company. The deal is subject to regulatory approval of online gambling in the U.S.

2. Melco Crown Entertainment ( MPEL) is a Hong-Kong based developer and owner of casino gaming and entertainment resorts focused on the Macau market. The company operates its facilities through its subsidiary Melco Crown Gaming, one of the six companies granted concessions or sub concessions to operate casinos in Macau.

Of the 19 analysts covering the stock, 79% recommend a buy and 21% rate a hold. Analysts' average 12-month price target of $14.88 for the stock is 70.6% higher than the current price, according to a Bloomberg consensus.

For the third quarter of 2011, the company reported net revenue at $1.05 billion, growing 44.6% from $726 million in the same period previous year. Record net income attributable to Melco Crown Entertainment for the third quarter of 2011 was $113.3 million, or 21 cents per ADS, compared with net income attributable to Melco Crown Entertainment of $15.8 million, or 3 cents per ADS, in the third quarter of 2010.

Melco Crown successfully listed on the Stock Exchange of Hong Kong and started trading on the main board of SEHK on Dec. 7.

1. Pinnacle Entertainment ( PNK), runs casinos and related facilities. It operates seven casinos located in Louisiana, Missouri, Indiana and Nevada, and a racetrack in Ohio. Pinnacle is also developing L'Auberge Casino & Hotel Baton Rouge and owns 26% stake in Asian Coast Development, an international company currently developing Vietnam's first large-scale integrated resort.

Of the 22 analysts covering the stock, 73% recommend a buy and 23% suggest a hold. Analysts' average 12-month price target for the stock is $15.92, about 74.7% higher than the current price, according to data compiled by Bloomberg

Pinnacle's third-quarter 2011 revenue increased 7.2% to $295.9 million from $275.8 million in the third quarter 2010. Operating income increased to $37.5 million, up 59.5% from $23.5 million in the corresponding period of 2010. Income from continuing operations for the quarter was $11 million, vs. $1 million in the same quarter of 2010.

In the development pipeline, L'Auberge Casino & Hotel Baton Rouge is on track to open in summer 2012. The company has also announced a planned $82 million expansion at River City Casino including 200 new hotel rooms, a covered parking structure with approximately 1,700 spaces and a 10,000 square foot multi-purpose convention center.

>>To see these stocks in action, visit the 5 Casino Stocks to Bet On in 2012 portfolio on Stockpickr.

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