The enthusiasm over companies staunching losses and improving earnings by cost cutting is now behind.
 
There are still companies that can cut a little deeper, and others whose reductions are still to be fully reflected, but most of the savings has been done.
 
Indeed, many casino operators admit they’ve about reached the point where further cuts would be counter productive.
 
So if companies are going to improve their bottom lines from here, they are going to have to grow revenue.
 
That already is an investor expectation, as has been implied by all the “what are you going to do next” kinds of questions asked on second quarter earnings conference calls.
 
Thus, we are entering a phase where the stocks of companies that can deliver b top line growth that falls to the bottom line will be generally better rewarded than those cost-cutting their way to higher profits.
 
And that is reasonable. As former Commerce Bank CEO Vernon Hill likes to say, you can’t cost-save your way to prosperity.
 
Some of the growth prospects are in projects begun before the credit crisis of the past year put the kibosh on new construction.
 
The list of publicly traded companies with recently opened projects or ones coming online within 12 months is fairly long. Among them: Ameristar, Genting International, Las Vegas Sands, MGM Mirage, Penn National, Pinnacle, Wynn.
 
Of course, several of them also face increasing competition that will offset gains.
 
Another source of growth is gaming expansion as 2009-2010 appears to be going down in history as a wave of jurisdictions opening, legalizing and expanding what already is allowed. Among them: Colorado, Delaware, Illinois, Maryland, Mexico, Ohio, Singapore, Taiwan, and maybe other jurisdictions such as Massachusetts
 
The sure winners in such expansions are the gaming suppliers.
 
Indeed, Bally CEO Dick Haddrill recently said that a perfect storm of good news is forming for suppliers.
 
He cited states legalizing gaming, improving economy, casino companies loosening their budgets, the “steady forward march of new technologies,” and, for his company, its own pipeline of new products and technologies. The latter, of course, is a claim his competitors make, as well, and justifiably so in many cases.
 
Finally, there is the kind of growth that comes simply from blocking and tackling.
 
Great Canadian Gaming, which has cut costs to improve its bottom line and which has suspended all the growth projects that it could, indicated that it will soon be making targeted marketing investments to lift revenue.
 
We suspect other companies will also lift up their heads to search around for prudent ways to get revenues growing again.
 
Other companies are cranking up the special events schedule to draw crowds.
 
And some casino companies are focusing again on gamblers and providing value to them at the expense of revenues from less profitable tourists.
 
Of course, the biggest boost to revenues would come from an expanding economy that refills consumer pockets and spirits.
 
And that, no gaming company can control.

By Frank Fantini

Frank Fantini is the editor and publisher of Fantini’s Gaming Report. A free 30-day trial subscription is available by calling toll free: 1-866-683-4357 or online at www.gaminginvestments.com.

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