GigaMedia in Store for Rough 4th Quarter; OPAP Shares to Suffer on Deregulation Threat; Interactive Thrives for Lottomatica

6 March 2009
GigaMedia Ltd.'s fourth quarter will likely disappoint but United States a long-term growth catalyst; deregulation likely to act as overhang on OPAP S.A. shares for foreseeable future; Interactive division performs well for Lottomatica S.p.A. in 2008.


Analysts with Roth Capital Partners in California have warned of "disappointing" fourth-quarter results from GigaMedia.

"We believe Giga will report disappointing results in both its real-money online game business and Asia online game business," the analysts said in a note Friday. "We note that PartyGaming and 888 both reported preliminary 4th qtr results below expectations on lighter than expected online poker and casino revenue."

Roth did say, however, that the United States represents a long-term catalyst for the company, which has never taken wagers from residents there.

"We believe this clean slate gives the company an edge during any potential licensing procedures and makes it a compelling take-out candidate."

Given the company's Everest brand and its association with the World Series of Poker -- and given that the owner of the World Series of Poker franchise is Harrah's Entertainment Inc., which is expected to lobby hard for Internet gambling -- GigaMedia conceivably has a leg up in the United States should the government elect to regulate.


Potential deregulation in Greece will continue to exert downward pressure on shares in OPAP, the world's largest gambling operator in the world by market capitalization, according to analysts with Morgan Stanley.

In a note Friday, Morgan Stanley said a recent decision by Greece's highest court raised significant doubt about the long-term validity of OPAP's gambling monopoly.

The analysts also said more aggressive marketing from land-based competitors like Stanleybet International and online competitors like Sportingbet will lead to an inevitable decline in OPAP's market share, sports margins, or both.

Their view contrasts sharply with that of Nikos Lianeris, an analyst with Proton Bank S.A. in Athens, who said in a recent note, "OPAP is still far from losing market share to competing networks given that (a) the legal procedures are lengthy and (b) competitors themselves are far from having a meaningful network and a respected brand name in the Greek market."

OPAP's fourth-quarter and full-yearly results are due out March 16, and Morgan Stanley is expecting annual revenues of 5.5 billion euros, up 9 percent over 2007, with earnings before interest, taxes, depreciation and amortization up 23 percent to 1.07 billion euros.

"OPAP trades at a premium to the global betting peer group, and with regulatory risks rising again, we think the risks of material changes in the company's earnings power are not being adequately reflected in the share price," Friday's note said.


Lottomatica reported revenue for 2008 rose 24 percent to 2.06 billion euros, with net income up 27 percent to 94 million euros.

Lottery, the company's most lucrative channel, logged income of 1.5 billion euros, up 9.3 percent over 2007. Gaming solutions was up 129 percent to 232.3 million euros; sports betting, 129 percent, to 232.3 million euros; and interactive, 500 percent, to 48.3 million euros. Commercial services, however, fell 13.8 percent to 83.5 million euros.

The company gave some color on how its Internet gaming acquisitions have fared.

Finsoft Ltd., which provides online betting technology, has since 2007 grown its customer base from 14 to 32, including four World Lottery Association members.

Boss Media A.B. grew across all areas of its business, including its poker networks in Austria and Italy. The online poker operation, as well as its casino and games suite businesses, experienced a 20 percent uptick in business, Lottomatica said.

St. Minver, the online gambling network operator, grew revenue 47 percent and logged a 60 percent rise in liquidity for its International Bingo Network.

Chris Krafcik is the editor of IGamingNews. He lives in St. Louis, Mo.