Originally posted in Gaming floor July 1999

The ups and downs of Australian casino stocks
Not quite AUSure Bet? 


    There are usually four ways that an individual can benefit financially from the presence of casinos. The first undoubtedly is to own or have a share in the business. Secondly, to work in some capacity on the premises. Thirdly, to sell goods or services to the operation(s) and lastly but extremely difficult, to play there and win.
     What make the four groups endeavours profitable is that they are outnumbered by the customers and players who after chancing their arm at the tables and slots, show, to put it mildly no financial gain. Winners and losers - just like life itself.

      But what about those persons who are owners by way of their share holdings in the casino companies. Perhaps their certificate is for only a fraction of 1% of the stock, but do they also benefit from the fact that lady luck & mathematics are on their side?.

    Lets invent our fictional investor. He's Australian and 3 years ago, being a bit of a punter himself he decided to invest in the "booming" Aussie casino business. Now he wants to cash out, will it be that World cruise with the missus or something a little more modest

    Assuming an investment of A$10,000 in a company and using statistics provided by Yahoo Finance we can find out how our intrepid investors potential portfolio of Australian gaming stocks has faired

Here are the 3 year results in alphabetical order -

Aristocrat Leisure.
It would have been tricky investing in Aristocrat 3 years ago as it was still a private company. Since floatation the leading maker of slots and  gaming equipment has seen its shares hit the jackpot. On a continuous rise for 2 years the A$10K would now be worth  A$40K.

AWA limited.
The operator of Keno and totalisator systems had a good run in 1996 but poor profits in 97 took the price down. The value of the holding currently standing at around A$13K.

Birswood Ltd.
The owner of the Perth casino and  convention centre facilities saw a decline in the value of the stock in 1998 to almost half their 1996 value. They have recovered and are now worth A$8K

Casinos Austria.
The owner and manager of a diverse portfolio of casinos finds it difficult to get itself into the win column. The original A$10K  had shrunk to almost A$2K. It has now recovered, perhaps buoyed by results from Lebanon to just above its 1996 value. A$10

Crown Ltd.
Shares in the Melbourne casino have had a miserable run. In 1998 down to almost a 10th of the 1996 value. High expenses and the Asian meltdown not helping. Interest from Kerry Packer perking up the price but still only worth A$3K.

Jupiters Ltd.
The operator of Queensland casinos in Brisbane & the Gold Coast has posted solid figures in 1997 and 98. The shares have also been on a consistent climb and the A$10K has grown into almost A$16K.

Star City Holdings.
The operator of the sole Sydney operation has the Olympics coming up and a 99 year lease. But in 1998 the stock lost half its value, again after poor results. It has recovered somewhat and now is marginally under the 1996 value.

Tabcorp Holdings.
Operates totalisators and gaming machines mainly in the State of Victoria. Made a recent bid for the Star City Casino. Solid results and margins have consistently pushed up the stock. After declining slightly it is still up to around A$22K.

Figures are not available for Reef Casino Trust or Consolidated Gaming.

    From an investment point of view companies in the gaming sector have shown mixed fortunes. Aristocrat & Tabcorp, both heavily involved in gaming machines have seen excellent & good returns respectively. The Casino operators, Birswood & Crown, Melbourne stock performing poorly.

    An original A$80K in all the 8 above would now be worth around A$122K. Take away Aristocrat and the money perhaps would have been better in the bank. It goes to show that wins on the gaming floor do not always filter through to the stock price but failures certainly will.
    Of course the last 3 years cannot be completely representative.  With the onset of legalized and taxed internet gaming in Australia the next 3 years could well be quite different as more people gamble but stay at home to do it.

    So. Our Aussie investor perhaps if he did buy Aristocrat, can indeed treat the wife to that cruise. If he stuck it into Crown stock, then better pack the camper.
 

Ian Sutton
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