Giga's Fourth Quarter Looking Softer than Expected; Aziz Near-Term Share Catalyst for Crypto

27 January 2009
Analysts with Roth Capital Partners are projecting a softer-than-expected fourth quarter for GigaMedia Ltd. but are bullish on CryptoLogic Ltd. as M&A speculation is expected to spur further near-term stock-exchange gains.

Poker revenue for GigaMedia, the California brokerage said Tuesday, has not rebounded as anticipated in the second half of the fourth quarter. While a specific number wasn't given, Roth Capital said that during December, player traffic was up 6 percent, quarter on quarter. That number, though, was below the industry average of 7 percent and Roth's own projection of 10 percent.

Revenue from T2CN, an online sports casual games provider in China, was also down more than expected due to a software-hacking issue that was resolved in December.

The company's casino, however, is expected to finish well after logging a record $11 million during the third quarter. That gain was made largely by cross-selling. But the largest catalyst will likely be the combination of a Japan-facing games offering and the company's newly launched sportsbetting arm.

"We look for both products to ramp in 1H09 and to be large growth drivers in 2H09 and FY10," the brokerage said. "We currently estimate the combined product initiatives to contribute $10M in revenue for FY09."

CryptoLogic, meanwhile, has gained 64 percent on the London Stock Exchange and 105 percent on the Nasdaq in the thirty days to Monday.

Although near-term projections for CryptoLogic are weak -- management expects fourth-quarter revenue to fall 14 percent, sequentially, on a strengthening United States dollar -- the company is expected to be profitable by the second half of 2009.

In the meantime, pressure exerted by Javaid Aziz, the company's former chief executive and an activist stakeholder, is thought to be acting as a share catalyst.

"We believe Mr. Aziz's interest could lead to M&A speculation and should put pressure on existing mgt to execute on its current restructuring efforts," the brokerage said.

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