Go For Online Poker Stock

Published: Friday, December 10, 2004 Online-Casinos.com

GO FOR ONLINE POKER STOCKS

Canadian analysts like online poker progress

The Canadian financial press was bullish on Internet poker stocks this week article on Internet poker stocks, urging Canadian investors to "Ante up on poker stocks!"

Analysts are bullish on makers of online gambling software led by Toronto-based CryptoLogic Inc. largely because of the booming online poker industry. CryptoLogic beat analysts' expectations for the third quarter this year with earnings of US$2.9-million, up 32% year over year. The company said it made more than 15% of earnings from its poker business, up 55% from the previous quarter.

The company runs the fourth biggest network of online poker sites in the world, and reports that more than 3,000 players can be found on its international networks at any given time.

"Online poker is the fastest-growing segment in the history of interactive gambling, and Cryptologic has a great seat at the winning table," CEO Lewis Rose is quoted as saying.

Investors, too, are excited about poker stocks. CryptoLogic shares (CRV/TSX) are up 76% to $27.40 since January, and 52% since it reported third-quarter earnings.

Meanwhile, Toronto-based and publicly listed CES Software PLC is up 28% to $3.86 year-to-date with Calgary-based Chartwell Technology Inc. (CWH/TSX) up 145% to $4.90. Boss SS, an industry leader that trades on the Stockholm exchange, is down slightly on the year but up 23% since August. InfoPowa has previously reported on this CES Software, which was started by Andrew Rifkin, one of the founders of Cryptologic.

Driving online poker growth is the recent success of televised poker matches, such as "World Series of Poker," "World Poker Tour" and celebrity games.

The success of online poker players in the this TV-hungry environment has translated into tremendous growth for the online poker industry. Poker Web sites are expecting revenue of US$1.5-billion this year, compared to just US$100-million two years ago. In total, more than US$30-billion in bets will be laid in 2004.

Most analysts agree there is still room to grow. In November, Greg Harris, an analyst with Canaccord Capital, raised his fiscal 2004 revenue estimate for Cryptologic to US$62.3-million, from US$60.2-million, and earnings per share estimate to US94 cents, from US85 cents, based on growth of the company's poker business.

Analysts are calling for 38% growth in CryptoLogic's poker revenue for 2004, but Harris thinks it could be even higher. He upgraded his estimated poker revenue to US$12.7-million for fiscal 2004, up from his earlier estimate of US$10.5-million, and US$21-million for fiscal 2005 (previously US$16.4-million).

Robert Winslow, an analyst with Harris Partners, initiated coverage on CES last week with a $4.00 target price and "buy" recommendation. He said depending on successful merger and acquisition execution, CES could offer returns of 300% to 500% over the medium term.

InfoPowa note - CES is currently in a major betting exchange partnership branded BetBull.com with Viennese public company Bet And Win.

He expects the company to provide a viable model for P2P gaming -- a sub-category of online gambling that allows for multi-player poker and sports betting exchanges -- in 2005.

"Supported by a cashed-up balance sheet, we believe CES Software has significant opportunity to expand the company's P2P gaming network and create shareholder value," Mr. Winslow said.