Market Briefs - Nov. 28 - Dec. 2, 2005

Betfair Could Release Cash to Appease Shareholders

Sir Robert Horton, chairman of British betting exchange Betfair, is said to be considering options to release cash to some of the company's shareholders to compensate for the cancellation of its £1 billion float. A group of American venture capitalists who own a large stake in Betfair are reportedly eager to exit, as is a fund controlled by LVMH boss Bernard Arnault, which owns about 10 percent of the company. One option to release cash would be to set up an internal market allowing existing shareholders to buy each other out. Horton is also considering paying a large dividend to all shareholders.

PBL Forecasts Betfair-Aided Growth

Publishing & Broadcasting's (PBL.AX) brokers forecast that the company's joint venture with Betfair in Australia should contribute A$40 million in EBITDA by 2010. Betfair's contribution should help PBL achieve double-digit growth, even though it now has a weakness in its TV operations. Financial services group UBS, meanwhile, has downgraded PBL's rating to "neutral" from "buy" because its forecast excess return has fallen below the 10 percent limit required for a "buy" rating.

Tatts Buys into Talarius

Australian gambling company Tattersall's has followed up on CEO David Jones' pledge to expand overseas by acquiring a 10.1 percent stake in British amusement arcade firm Talarius, which owns and operates the Quicksilver chain of adult gaming centers. The purchase is thought to be friendly, and Tattersall's could attempt to become a strategic partner to Talarius.

Genting Reports Solid Q3

Genting, Asia's largest publicly traded casino operator, has recorded a gain of more than 66 percent in profits for its third financial quarter of 2005 due to an increased number of visitors and an increased volume of gaming business, in addition to higher gas prices and production at its oil properties. Net income for the quarter ended Sept. 30 increased to US$107.5 million from $63.9 million over the same period last year, while sales improved 29 percent to $389 million. Genting's casino division was responsible for delivering a 59 percent increase in pretax profit, and the company reported a one-time gain of $30.2 million from a capital reorganization of British betting gaming firm Stanley Leisure. Genting owns about 20 percent of Stanley Leisure, which returned $563 million to investors after it sold its betting arm, Stanleybet, to William Hill to focus on its casino operations.

Genting International will soon launch an IPO in Singapore so that it may switch its primary listing from the Luxembourg market. Genting will offer 800 million shares at 35 Singapore cents (US$0.21), thereby raising close to $170 million. The placement has already been oversubscribed by about 7.5 times, so the over-allotment option is sure to be exercised.

The company is engaged in competition with other casino operators, including Harrah's Entertainment and MGM Mirage, for an integrated casino license in Singapore. If successful, Genting says it would spend about $2 billion on the project. Genting has also indicated that it wants to expand in Macau, China and other Asian countries.

Reporting

Sportingbet Plc's (SBT.L) first-quarter report for the three months ended Oct. 31, 2005 is filled with tremendous results. In addition to showing the actual results from both the first quarter and the corresponding period in 2004, Sportingbet has also provide pro-forma results to reflect what sort of gains would have been made if Paradise Poker (which it acquired in October 2004) had been owned by the company all of last year. Gross margin rose 167 percent to £64.6 million compared to £24.2 million last year (82 percent increase on pro-forma basis), operating profit rose 396 percent to £22.3 million over last year's £4.5 million (a 76 percent increase on a pro-forma basis), and profit before tax rose 450 percent to £14.3 million compared to £2.6 million last year (81 percent increase on a pro-forma basis). Basic earnings per share have risen to 6.2p from last year's 2.1p, and diluted earnings per share have risen to 4.9p from last year's 1.5p. Sportingbet logged 700,000 new registered customers in the period--an improvement over last year's 100,000--in addition to 170,000 new real-money customers, compared to last year's 70,000.

Sportingbet's upbeat report has prompted Morgan Stanley to speculate that PartyGaming has been "losing market share to Paradise (Poker) this year," noting that Paradise Poker experienced a 33 percent gain in gross win between May and July of '05 and August and October of '05, while PartyPoker attained a gain of 2 percent in gross win between April and June of '05 and July and Sept of '05.

Sportingbet's finance director, Andrew McIver, stated that the company has no interest in pitching another bid for rival poker operator Empire Online, but confirmed that it is still actively seeking acquisitions. Commenting on Sportingbet's negotiations in September to acquire Empire Online, McIver stated, "We only ever really got into preliminary conversations with them, and obviously it leaked, and they put out a press announcement on the back of it."