Separating themselves from the broader market, investors pushed the AGEM Index upward to a level not seen in 15 months, as 10 of the 17 publicly traded global gaming suppliers reported a month-over-month increase in their stock valuations during the month of July 2011. Overall, the AGEM Index grew 3.46 points, or 3.1 percent, closing at 114.07 points. In contrast, the broader equity markets in the United States pulled back during the month, largely attributable to concerns over a looming deadline on the federal debt ceiling in the final week of trading. For comparison purposes, the NASDAQ Composite slipped a modest 0.6 percent, while the Standard & Poor’s 500 Index and the Dow Jones Industrial Average each declined nearly 2.2 percent.
Selected positive contributors to the index during the month included the following:
• Konami (KNM) recorded a 9.75-percent increase in its stock valuation, adding 1.98 points to the index.
• International Game Technology (IGT) contributed 1.84 points to the index, sourced to a 5.75-percent gain in its stock price.
Selected negative contributors to the index included:
• WMS Industries (WMS) contributed negative 0.93 points to the index, with its stock valuation falling 10.25 percent.
• Bally Technologies (BYI) reported a 3.07-percent decline in its stock price, removing 0.37 points from the index.
Additional austerity measures in European economies, concerns over the U.S. federal deficit and inflation worries in Asia are challenging investors and putting pressure on an economic recovery from taking hold in the near term. Not unlike investors, consumers witnessed positive jobs reports during the first quarter, only to see them wane in the second quarter. U.S. consumer confidence, as measured by The Conference Board, is down 17.4 percent since February. This downward pressure from macro indicators has the potential to undermine or slow growth in selected casino markets and ultimately global gaming equipment manufacturers.
In an effort to diversify operations and seek out new opportunites and revenue streams, gaming manufacturers have participated in several acquisitions and partnerships over the last several months. As sports-related gaming migrates from traditional brick-and-mortar betting shops to the virtual bookmakers, it is likely that both new and traditional gamers will become ever more confident to wager over a network from outside the doors of a physical casino. Selected operators hoping to get ahead of that tipping point through recent transactions include Aristocrat Leisure Limited, International Game Technology (IGT) and Bally Technologies.
In March, Aristocrat and GameAccount Network completed a partnership agreement, with GameAccount Network developing and delivering Aristocrat’s slot games and content to online players in regulated markets. GameAccount Network is an e-gaming company based in London and operates several online gaming networks and white labeled casino sites for regulated international operators. IGT inked a similar deal with GameAccount Network in June, where IGT will provide game content from more than 70 slot games in its portfolio to be used on their MoneyGaming casino website.
IGT is also seeking out new market opportunities through acquistion. Through a wholly-owned subsidiary, IGT made a cash offer for Entraction Holding AB in May, for which it acquired 97.6 percent of all shares by the end of June. Entraction Holding AB is based in Sweden and operates legalized online poker networks, as well as delivering online gaming products including bingo, casino games and sports betting.
Bally Technologies is capatilzing on the rise of mobile devices through its purchase of MacroView Labs during the month of July. Unlike online and mobile gaming applications, MacroView Labs designs mobile web applications for the hospitality industry, including physical hotel-casino operators. Their portfolio includes the development of mobile applications for several Hard Rock Hotel and Casino properties, MGM Resorts International and Palms.
Whether gaming equipment manufacturers are looking ahead to compete with traditional casino operators in the virtual betting space, provide existing content on a mobile platform or deliver premium game content to online gaming operators, they are positioning themselves for new market realities. Interactive gaming is already a global gaming market, but if existing equipment manufacturers can add content, knowledge and brand equity to this medium, they will be able to diversify and broaden their portfolios for the next generation of gamers.
The AGEM Index and analysis is prepared by Applied Analysis, a Nevada-based advisory services firm.
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