Market Briefs (April 15-19)

BHB Deal Improves UK Bookies' Credit

The recently reached content licensing agreement between U.K. bookmakers and the British Horseracing Board is improving the gaming companies' credit, reports the Financial Times.

Hilton Group (HG), William Hill and Coral group made a five-year deal last week with the BHB. The agreement dictates that the bookmakers will pay the BHB 10 percent of their profits from British horse race betting in return for use of the BHB's pre-race data on participants.

Standard & Poor's Corporate Ratings Europe said the agreement is improving the bookmakers' creditworthiness.

"The new deal is positive for the credit quality of U.K. gaming issuers because it streamlines the tax and levy regime, leaving the gaming operators in better control of their pricing environment and gross margins," said Anna Overton of Standard & Poor's Corporate Ratings Europe.

"It also clears the most significant area of business uncertainty remaining in the industry, giving LBOs William Hill and Coral further options for corporate development such as an IPO, trade sale or merger with other gaming companies."

attheraces Experience Early Success

Now in operation for 15 weeks, attheraces is taking about £38,000 in wagers per week from its subscribers.

The interactive horse race wagering site, based in the United Kingdom, is a joint venture among Arena Leisure (ARE), Channel 4 and British Sky Broadcasting (BSY). An attheraces digital cable channel is expected to launch May 1.

Ian Penrose, managing director of Arena Leisure, said the amount of money being bet on the site is in accordance with company expectations. Arena's operating loss in attheraces was £3.94 million in 2001.

"We've started very low, but that was always going to be the case," Penrose said.

Q1 PayPal Report Shows Revenue Increase

PayPal (PYPL) is reporting a profit and a 300 percent increase in revenue in its first quarter report, which is also its first reporting period as a public company.

The company, based in Palo Alto, Calif., received net income of $1.2 million, or 2 cents per share. Last year, during the corresponding time period, the company had a loss of $29.3 million. Revenue increased to $48.8 million from $14 million.

The Internet payment provider estimates the year's worth of revenue will be between $220 million and $230 million and that earnings will be between 34 cents and 36 cents per share. PayPal went public in February.

Youbet.com Auditor Expresses Concern

Youbet.com's auditor said it has doubt the wagering company can continue to operate given its financial situation, reports Harness Tracks of America's executive newsletter from April 18.

BDO Seidman, the auditor, said Youbet.com's recent report reflects operating losses and the need to raise additional money. Youbet.com, HTA wrote, said it is confident it can improve its financial position.

VirtGame Completes Placement

VirtGame Corp. (VGTI.OB) this week completed a private placement straight equity funding with three partnerships that are managed by ICM Asset Management.

ICM manages more than $2.3 billion in assets and offers a variety of investment opportunities for individuals, businesses, pensions, foundations and endowments.

VirtGame COO and CFO Bruce Merati said he is glad to see VirtGame involved with ICM.

"We are pleased to see our approach in developing an integrated solution for the interactive gaming and lottery industries is getting recognition by a high-quality institution such as ICM Asset Management," he said.

Forbes Weighs in on I-Gaming Stocks

A Forbes article from April 18 told investors to "beware of online gambling."

The article, a sidebar to a longer piece on the global gambling industry, said online gambling stocks may look good but are not doubling yearly in price because of a variety of factors, including difficulty in entering the marketplace, credit card transaction problems and the "absence of the thrill of gambling in a casino."

Marc Lesnick of Streetdice told Forbes that software suppliers' stocks, particularly those of Boss Media (BOSS.ST), CryptoLogic (CRYP) and Chartwell Technology (CWH) have high trading volumes but fail to attract institutional investors.

"If a stock is trading at a volume of less than $500,000 per day, then guess what? You've got private investors, and they can't maintain a high share price," he said.

MGAM Stock Drops after MegaNanza Opinion

Multimedia Games' (MGAM) stock took a dive on Tuesday, closing at $26.23, down significantly from Monday's close at $35.22.

By the end of the day on Friday, the stock closed higher at $27.50.

MGAM released a statement Wednesday saying the fall in stock price was due to an advisory opinion issued by the deputy general counsel of the National Indian Gaming Commission. The advisory opinion stated that Multimedia Games' MegaNanza is a Class III bingo game.

Gordon Graves, chairman and CEO, said the company had filed a common stock offering with the SEC but was not interested in undertaking the offering at the company's current stock prices. Graves said the company is converting the action to a shelf offering that can be used for equity and debt.

He said he is optimistic that Multimedia Games will rebound.

"We have faced similar and even more serious issues before and emerged a stronger company," he said. "We have in place long-standing strategies to protect our customers; profitable gaming operations, and we have the people, the processes, the technology and the systems to enable us to implement these strategies promptly, at nominal cost, and with little impact on our daily operations."

betandwin.com Q4 2001 Results

betandwin.com (936172.BE) saw turnover jump to 23.9 million euros in the fourth quarter of 2001 from 7.6 million euros in the final quarter of 2000. In addition, net winnings from betting and casino operations generated 1,635 million euros, up significantly from 938,000 euros the previous year.

The casino and betting site operator, which is traded on the Munich exchange, has 24,562 new registrations and 23,499 active betting customers.

The company's expenses increased to 4,329 million euros from 3,870 euros in the last quarter of 2000.

CryptoLogic Conference Call April 30

CryptoLogic (CRYP) will discuss its first quarter results at a conference call at 8:30 EST on April 30. To participate, call 416-695-5801 or 1-800-478-9326 ten minutes before the start of the conference. A replay of the call will be available until May 7 by calling 416-695-5800 or 1-800-408-3053 and entering the passcode 1135626. Additionally, the call will be webcast from CryptoLogic's site.

Reports Released

During the first quarter of 2002, Scientific Games Corp. (SGMS) had revenue of $107 million, down from last year's $112.1 million. EBITDA, however, rose to $30.1 million in the first quarter of 2002 from $24.7 in the first quarter of 2001. Net income to common stockholders was 10 cents per share.