he latest surge in the index helped break the 100-point barrier and provided the first double-digit percentage increase since July of 2009. Compared to a year ago, the index remains down a marginal 0.8 %.
The AGEM Index outpaced the broader market measurements as the Dow Jones Industrial Average and Standard and Poor's 500 Index increased by a strong 4.8 % and 5.9 %, respectively, during the month of December. Selected positive contributors to the index during the month included:
IGT reported an increase of 14.28 % in its stock valuation, adding 3.79 points to the index. Konami contributed 2.11 points to the index based on a 14.28 % gain in its stock price. Selected negative contributors to the index included: Lottomatica witnessed its stock price fall 1.96 %, contributing -0.16 points to the index.
Intralot posted a 3.49 % decline in its stock valuation, contributing negative 0.08 points to the index. Before record rainfall arrived in Las Vegas and winter storms blanketed much of Atlantic City with snow in December, Caesars Entertainment's CFO Jonathan Halkyard's described the 2011 outlook for the gaming industry as "more tough sledding."
Las Vegas laid witness to the opening of The Cosmopolitan of Las Vegas, which will likely be the last casino-resort to be built on the strip for many years. With initial reviews being positive and the use of many manufacturers' latest technological advances, global gaming suppliers will now have to turn their attention to upgrading existing Las Vegas operators in what has traditionally been the testing ground for new technology.
Casinos' ability to invest in new technology and maintain a shorter lifecycle of hardware replacement is largely related to their performance. What may be fortunate for gaming manufactureres is that Moody's Investors Service revised their previous 2011 estimate for gaming revenue from flat to positive. However, the 1-to-2-percent growth in gaming revenue is marginal, especially for operators servicing larger debt loads carried over from the Great Recession. Although the report was positive for the sector, it did warn that tough times will linger, with the expectation that unemployment levels will remain elevated and the proliferation of gaming will likely continue.
PricewaterhouseCoopers (PwC) also cited improvement in the overall economy and disposal income as signs that gaming revenue would start to steadily rebound. Nevertheless, with estimates of Nevada gaming revenue not returning to prerecession levels until 2014, there is still some pain to endure.
For global gaming suppliers to rebound quicker, incremental revenue sourced to U.S. operations and international growth will be required. While new casinos are expected to open in Kansas, Maryland, and Oklahoma, and expansions in Illinois are on the horizon, gaming manufacturers may find their greatest revenue potential in markets outside the U.S. Reforms in Syria led to the first casino opening since 1963. Lawmakers in Ireland are exploring options to open a large-scale casino-resort and licensing online betting. It is expected that casino gaming will expand in Europe as many countries adjust to new austerity measures and governments enact tax-generating policies that may include gambling.
Nonetheless, Asia continues to be the growing player and will likely outpace the U.S. market over the next decade. For 2010, Macau gaming revenue grew 57.8 % to us$ 23.5 billion. Singapore's two casino-resorts have been operational for less than a year and are still expected to generate nearly us$ 3 billion. Add in the potential for expanded gaming in Korea and Vietnam, and global gaming suppliers will likely focus more of their attention on overseas operations.
In addition to the overall performance of the index, Marcus Prater, Executive Director of AGEM, commented on the impact the market's performance may have on AGEM members, "While the AGEM Index is comprised of selected publicly traded AGEM members, it is important to note that the overall AGEM membership has increased significantly during the latest business cycle. From 32 members to 107 in 33 months, AGEM continues to grow and play an important role in the gaming industry. As travel and convention business returns toward pre-recession levels, and gaming operators slowly invest in new technology, AGEM members will have a greater impact on the businesses and communities in which they serve."