Poker and blackjack are hot, particularly with the younger crowd. That's not great news for the gambling industry, which has significantly better profit margins on slot machines than table games.

But several companies are aiming to help casinos make more money on table games, and a local analyst says investors in at least one of them may be dealt a good hand in the process.

"My grandma loves to go to Vegas and play slots," said Jennifer L. Hanson, senior equity analyst at Cortina Asset Management LLC in Milwaukee. "She would never play table games, but that's what my generation wants to play."

Hanson, 33, says she has played poker in Las Vegas many times and is among a growing number of people in her age group enjoying the game.

She's not alone.

Although the majority of gamblers still prefer slots, table games are much more popular with younger players, according to the 2004 Harrah's survey of U.S. gamblers. Just 19% of all gamblers who are older than 50 said they played table games such as blackjack and craps, compared with 33% of those younger than 50, the survey found.

Slot machines peaked in popularity in 2003, when their revenue accounted for 67% of casino revenue in all of Nevada, according to Gaming Today, an Internet publication that covers the gaming industry.

Casinos are adding game tables to keep up with the trends but face problems because the additions require more staff such as pit bosses, dealers and people to police the players than slot machines do.

That's where Hanson says the companies with player-tracking tables come in. Such companies are offering either optical scanning or radio frequency identification (RFID) technologies that allow casino operators to calculate which players have spent enough to deserve freebies, and catch card counters and cheating dealers.

"These technologies make a lot of sense because they bring table games closer to the slot economies," Hanson said.

Both technologies track the cards as they are dealt out of the shoe. The optical technology scans a stripe on the side of the chips, and the RFID technology reads computer chips in the betting chips, to keep track of players' bets.

The optical technology relies on a line of sight, so it's conceivable a player or dealer could pull a chip from the bottom of a pile of haphazardly stacked chips without detection, Hanson said.

"With RFID, there's a pad in the table dedicated to each spot where there's a player that reads the entire area, even beyond where the chips are," Hanson said. "So if you pull a chip out of there, it will know."

Alliance Gaming Corp. (AGI, $11.42) is a Las Vegas company that makes gaming machines and systems, including a product called MindPlay, which offers optical scanning technology for table games.

Fewer than 100 game tables use MindPlay, and the company's business is much more focused on slot machines, Hanson said. Alliance delayed reporting financial information for its most recent quarter as it brings out a new slot machine system to replace one that had problems, she said. Hanson said she passed on this stock for those reasons and because of her belief in the future of RFID technology.

"I think RFID is definitely the winning technology for tracking chips it's virtually 100 percent accurate," she said.

Gaming Partners International Corp. (GPIC, $18.99), Las Vegas, makes betting chips with RFID chips in them. The company has had stock price appreciation of more than 300% in the last year, Hanson said.

Three other Las Vegas companies International Game Technology (IGT, $26.98), Shuffle Master Inc. (SHFL, $23.37) and Progressive Gaming International Corp. (PGIC, $12.31), which until recently was called Mikohn announced in June an alliance to offer an RFID table management system. The system would use International Game Technology's data analysis software and distribution, Shuffle Master's automatic shuffler and card-dealing shoe, and Progressive's hardware for tracking players and their bets.

She says Progressive stands to benefit most from the alliance because with a market cap of about $300 million, it's the smallest of the three companies.

Progressive should make about 35 cents a share this year, a big improvement from its loss of $2 a share in 2003, Hanson said. The company announced last week an equity offering that will let it pay off $65 million, which will likely add 25 cents or more to 2006 earnings, she said.

The RFID table management alliance could add another $1 a year to earnings in the long term, she said.

Progressive is also working to introduce downloadable games for its slot machine business, which could also add to earnings down the road, Hanson said.

The biggest risk associated with this stock is the possibility casino operators might not embrace the RFID table management system, but she says they should because it makes so much financial sense.

Hanson began buying Progressive shares in late 2004 at about $9 for client accounts and is still buying for new accounts.

These shares could go as high as $18 in the next 12 to 18 months, she said.

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The Milwaukee Investment Analysts Society has 487 members, 366 of whom describe themselves as portfolio managers or analysts. The Journal Sentinel focuses on one local money manager or analyst in this weekly feature, looking at a trend that helps investment pros make their decisions.

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Copyright 2005 Journal Sentinel Inc. Note: This notice does not apply to those news items already copyrighted and received through wire services or other media
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