Oct. 31 | Financial Week in Review

Sector Overview

It's been a torrid month for I-gaming stocks.

In a survey of 20 companies by IGamingNews, value fell 12.55 percent between Oct. 6 and Oct. 31. Sentiment across the sector, moreover, has changed markedly from six months ago, when the effects of the current downturn had yet to manifest.

Atop the list of worst affected were 888 Holdings (down 41 percent), PartyGaming (down 32.7 percent) and Intralot S.A. (down 32 percent); but Paddy Power (up 3.9 percent), Tatts Group Ltd. (up 9.2 percent) and Lottomatica S.p.A. (up 5 percent) have turned in positive performances, respectively.

And just today, Net Entertainment A.B., the Swedish casino software supplier, reported net profits rose 99.7 percent, year over year, to 19.9 million Swedish kronor. The company's rapidly increasing stable of licensees -- 18 signed last year, 16 signed in the year to date -- has significantly driven growth, the company's chief executive said.

"Certainly, NetEnt have enough momentum to see them through," Simon J. Holliday, the director of H2 Gambling Capital, said in an e-mail to IGN today. "There are a couple of these more niche Scandinavian software providers that are doing well.

"I’m expecting sound results from Entraction even if revenue per player is down on the network," he continued. "The bigger boys are all after the bigger licensees whilst the number of licensees that the smaller networks are able to pick up demonstrates that there are still small entrepreneurs interested in the space."

Probability also reported a profitable half but its house broker, Collins Stewart, projects it will be yearend 2009 before the mobile gambling operator reports a maiden full-yearly profit. Interestingly, in its core market of the United Kingdom, the company said it is having success with cost-conscious consumers who do not moonlight as online gamblers.

Meanwhile, analysts with Daniel Stewart & Co. and Numis Securities downgraded forecasts for 888 Holdings and PartyGaming on exposure to the hypercompetitive poker industry -- an industry, we posit, that is feeling the initial pinch of recession with smaller players like Playwize, Lasseters and Duplicate Poker being forced to close.

Compounding matters for the listed poker sector, financial sources have told IGN that since Jan. 1, 2008, player traffic on American sites is up 24 percent while that on non-American sites is down 4 percent.

Year on year, Sportingbet's poker revenue from Paradise has fallen 28 percent on reduced marketing and United States competition, while between the first and second quarter of this year, PartyGaming fell 9.1 percent, 888 fell 10 percent, CryptoLogic Ltd. fell 14.2 percent and Entraction Holding A.B. fell 14.4 percent.

Hope, however, remains strong in emerging markets like Croatia, where Internet gambling -- amid classically gray regulatory circumstances -- is growing.

Key Financial News

Seasonality Rebounds, Forex Movements Concern Analysts

As many companies prepare to release third-quarter results, some of I-gaming’s biggest names have been downgraded by brokerages in recent weeks.

U.K. Consumer Downturn Hits Neteller's Netbanx Europe

Neteller, the soon-to-be-renamed Internet commerce group, has reported top-line growth and an uptick at the EBIT level during the third quarter, but revenue from its European payments gateway stalled, in part, on exposure to waning consumer confidence in the United Kingdom.

Fleet Street Closes on Chaotic Economy

Fleet Street Games, a subscription-based online poker site, will close on Oct. 31 after the nascent company revealed a "chaotic economy" had adversely affected its business.

Emerging Markets | Croatia

Before Croatia gained independence from Yugoslavia in 1991, its gaming industry consisted of casinos and the national lottery. The casinos were reserved for foreign visitors and higher ranking Communist Party officials, while ordinary people were only allowed to play with the national lottery, established in 1973.