PartyGaming has unveiled an upbeat trading statement, but said little about what investors are really keen on - its thoughts on consolidation in the online gaming sector.
The company was recently said to be in talks with Austria's Bwin about a merger, although Bwin subsequently played this down. Today PartyGaming annouced it had set up a new £35m loan which would be used for "general corporate purposes including mergers and aquisitions." But that is not enough cash to cover the sort of deals investors had in mind, ie the Bwins of this world.
On the business front the company said current trading was solid, and earnings for the year were expected to be slightly ahead of expectations. Its shares have edged down 0.3p to 258.3p but Investec analyst Matthew Gerard issued a buy note and said:
Albeit brief, this is an encouraging update. We expect the increasing focus on casino and bingo to drive robust revenue and earnings growth in what remains a structurally attractive sector. This supports the current 15 times 2010 PE valuation, whilst consolidation and regulatory change-driven growth offers more material upside, in our view.
KBC Peel Hunt's Nick Batram was also positive:
Our buy stance is based upon the view that Party is an attractive asset in a global market with exciting growth and consolidation prospects. Poker has stabilised, casino and sportsbook are growing and new markets and B2B present further opportunities. Assuming stable currencies the group should return to earnings growth in 2010. A prospective PE of 16.1 times doesn't look expensive given the opportunity for growth and corporate activity.
Elsewhere Sportingbet shares climbed 1.25p to 66.25p after an annual meeting statement stating that trading was in line and the company was confident of a satisfactory outcome for the year. Oriel Securities analyst Jeffrey Harwood said:
Sportingbet indicates that the main trends seen in the first quarter (reported on 25 November) have continued. The group is benefiting from its focus on European sports betting where revenues were 56% ahead in the first quarter.
Following some recent weakness the shares look attractive on a prospective PE of 10 times. Shares moving up to the main market in early 2010.
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