Ahead of the Bell: Penn National Gaming

Ohio referendum could move Penn National Gaming's stock, analyst says

• On 8:23 am EST, Tuesday November 3, 2009

NEW YORK (AP) -- The result of an Ohio referendum that could legalize four casinos in the state may prove to be a catalyst for Penn National Gaming Inc. shares, an analyst said Tuesday.

The ballot measure would allow casinos in Cleveland, Columbus, Cincinnati and Toledo if passed. Supporters say the casinos would bring jobs and $650 million in annual tax revenue, mostly for local governments. Opponents charge the proposed 33 percent tax rate and $50 million license fee for each casino is lower than in other states.

It is the state's fifth major gambling referendum in the last two decades.

David Katz of Oppenheimer said in a client note that the referendum might impact Penn's stock because the casino operator is on tap to own and run two of the casinos if the referendum passes.

"Although we offer no indication on the likelihood of the outcome of the vote, as it is presently too close to call, we believe a positive outcome for Penn could add significant value, which is not reflected in our forecast," Katz wrote.

If the referendum does not pass, Penn's stock could fall, which would give investors a more appealing buy opportunity, the analyst added.

Katz maintained an "Outperform" rating and $37 price target on the shares.