With the rapid expansion of gaming and a shift to cashless slot technology, the biggest winner of them all is the Intel of the gaming world -- Reno-based slot machine manufacturer International Game Technology (NYSE:IGT).
For the fourth quarter, IGT saw net income rise to 72% to $108.3 million, or $0.31 per share, as revenues rose 14% to $547.5 million. For the full year, worldwide unit sales came in at a record 134,800 units as revenues grew 26% to $1.1 billion.
IGT is benefiting from the expansion of gaming. For example, MGM Mirage (NYSE:MGG) and Boyd Gaming's (NYSE:BYD) new Borgata in Atlantic City just opened in July with 3,650 slots. New jurisdiction operators such as Ameristar (NASDAQ:ASCA), Harrah's Entertainment (NYSE:HET), Argosy (NYSE:AGY), and Isle of Capri (NASDAQ:ISLE) have also fueled IGT's fire in recent years with new facilities across the Midwest and the South.
Native American gaming hasn't hurt either, with contributions most notably from Foxwoods and Mohegan Sun in Connecticut. This expansion trend will continue as MGM Mirage, Harrah's, and Isle of Capri move overseas into the U.K., and as Wynn Resorts (NASDAQ:WYNN) steps into Macau in the coming years.
IGT is also getting a big boost from the shift to cashless slots, which help to improve a casino's operational efficiencies while allowing a casino patron greater freedom to work the slot floor. IGT saw replacement sales improve 38% in the quarter and 43% for the year to 58,000 units.
And there's room for a lot more where that came from: in the February 2003 issue of Casino Journal, a slot marketing executive was quoted as saying that cashless slots accounted for only 10% of all slots in North America.
In recent days, both Station Casinos (NYSE:STN) and Harrah's have put in large cashless slot orders. Ameristar Casinos -- which began the year as the cashless leader with 54% of its slots ticket-enabled -- will be 75% cashless by the end of the year and 100% by the end of next year. Why are casino operators salivating? IGT's cashless slots have helped Ameristar exhibit some of the highest cash flow margins in the industry.
Take a walk down the Las Vegas Strip, and expect more cashless slots from MGM Mirage, with Mandalay Resort Group (NYSE:MBG) and Park Place (NYSE:PPE) getting more into the mix.
IGT is right there to satisfy those needs, but it's not as if nobody noticed. IGT is worth a fair premium at about 25 times this year's earnings.
Jeff Hwang owns shares of Ameristar Casinos, and can be reached at [email protected].
