"A Broker's Bubbly Ballyhoo for Bally"
By Dan Dorfman
Daily News, April 29, 1982

You know the saying: "One man's pain is another man's joy."

Well, that's one thrust of a double-barreled pitch institutional investors will 
be fed over the next week on Bally Manufacturing Co., the nation's largest 
maker of gaming (or slot) machines and a surging force in the leisure-time 
field.

And it comes at a time of concern that the explosive video-game business-- the 
chief reason for the surge in Bally's shares from a 52-week low of 20 1/2 to a 
recent price of 30 1/4-- could fall prey to slowing growth and sharply rising 
competition. Already, some of Wall Street's sharp hedge-fund crowd is selling 
short-- a bet on lower stock prices-- the shares of Warner Communications, a 
hot stock and a kingpin of the videogame companies (through its Atari 
division).

The pitch begins today, when the brokerage firm of Ladenburg Thalmann & Co., a 
longtime Bally booster, fires off a research report-- its third in six years 
and its first since '78-- to some 100 institutional clients. The second salvo 
of the broadside will come Wednesday, when Bally's management reviews the 
company at a luncheon in New York for institutional heavyweights.

First to the Ladenburg report. Its major thrust: The pain that city and state 
governments soon should be feeling as a result of Reaganomics-- namely, the 
sharp cutbacks in federal aid-- could spur enactment of legislation to legalize 
gambling. And that, Ladenburg figures, could prove to be a bonanza for Bally.

There's cumbersome machinery long processes and lots of opposition, but my 
feeling is that if one state takes legislative action in this direction--  
which is quite feasible in the current economic environment-- you could easily 
make a case for a steamroller effect," says Ron Koenig, Ladenburg's managing 
director and the author of the Bally report.

Ladenburg, which bought about 500,000 Bally shares for its clients last year 
and about 100,000 so far in '82 first recommended Bally in '76 at 6% and again 
in '78 at 13. Why a recommendation now after such a run-up?

Because it's a far more attractive investment opportunity today than it was in 
the past, replies Koenig. "Yesterday it was a speculation; today it's an 
investment-grade security."

He stresses that Bally no longer is a single-facet company-- strictly a slot-
machine maker (now only about 6% of revenues)-- but rather a rapidly growing 
leisure-time force catering to the entire family. He cites in particular 
Bally's acquisition of the Six Flags amusement parks-- an estimated $300 
million business this year-- making it second only to Disney in this field.

Add this to Bally's more than 350 Aladdin's Castle family amusement-arcade 
centers "and you give the company almost a motherhood image... that 
institutions may find easier to buy," says Koenig.

Given the prospects of an earnings gain in a recessionary year (Koenig is 
predicting $3.50 a share in '82, vs. $3.03 in '81) and the growing perception 
"of the inevitable trend toward legalized gaming throughout the country," he 
figures it's only a matter of time before Wall Street accords the company's 
shares--  now at 8.5 times his estimated '82 net-- sharply higher valuation.

In a phone interview, Bally chief Bob Mullane told me he's "very pleased" with 
the current tempo of sales. Through mid-April, all Bally divisions-- with the 
exception of slot machines (down about 10%-to-15%)-- are beating year-earlier 
revenue figures, he says.

He figures an '82 performance of $3.50 a share on sales of $1.2 billion is a 
reasonable expectation. And he sees as "achievable" an '83 showing of $4.10-to-
$4.20 a share on about $1.4 billion to $1.5 billion in revenues.

In addition to growth prospects through legalized gambling, Bally's chief 
investment enticement is its booming coin-operated video-game business (40% of 
'81's sales and more than 40% of its profits). And there are fears on Wall 
Street that Bally may not be able to top its '81 showing in this arena-- what 
with last year's results benefiting strongly from a huge business in Pac-Man 
machines, the biggest video-game seller ever.

Mullane's response: We're not ready to roll over and play dead and say video 
games can't beat '82 figures." Bally is targeting for a 10%-to-20% gain in unit 
sales. And in support of this, he cites a very fast start for Ms. Pac-Man, a 
new video game, a "good stable" of accompanying new video games and a likely 
resurgence, especially abroad, of the flipper pinball games.

Mullane, citing legislative hassles, is not so enthusiastic about legalized 
gaming. And it's not something, he says, "we're building our future around. 
It's a hackneyed phrase, Mullane went on, "but we're betting our future -- and 
it's a good one-- on more and more leisure time. It's what people want as part 
of their life styles and it's where we're going to be."	

(c) Tribune Company Syndicate Inc.

Daily News, Thursday, April 29, 1982