Sterne Agee Lowers Asia Entertainment's EPS

In a research report published earlier today, Sterne Agee has lowered Asia Entertainment & Resources Ltd.'s (NASDAQ: AERL) EPS estimates due to higher cash pay volume.

Sterne Agee said in the report, “We are lowering our 4Q11E EPS to $0.48 from $0.51 to account for our assumption of an increased mix of cash play in AERL rooms. Cash play is generated when a junket operator in a promoter's room provides its own capital for player wagers. Given the promoter extends no credit when the junket provides its own cash (promoter takes on no financial risk), commissions to a junket using “cash play” are typically higher than average. To be conservative, we have also rolled forward a higher assumption of cash play through CY12 and CY13. Our CY12 EPS goes to $2.06 from $2.27, while CY13 goes to $2.56 from $2.83.”

Sterne Agee maintains its Buy rating and $22.50 PT on Asia Entertainment, which is currently trading at $6.15.

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