PartyGaming First-Quarter Revenue up 21% (Update 1, GBGC Comment)

PartyGaming, the online gambling operator, said it was confident about its full-year prospects after revealing a 21 percent rise in first-quarter revenue.

Group revenue growth was driven primarily by a strong performance in casino, with revenue up 45 percent to $43.5 million from $30.1 million in the year-ago period.

Year on year, real-money casino sign-ups were down 30 percent, though rose 11 percent against the previous quarter.

On Wednesday's conference call with analysts and investors, Chief Executive Mitchell A. Garber said the company will launch the first of its movie-branded slots -- per a December 2007 licensing deal with Paramount Pictures -- before the first half of 2008 concludes.

Revenue from poker, the group's core business, was up 13 percent to $80.7 million versus $71.6 million in the first quarter of 2007, with total real-money sign-ups rising 10 percent to 130,900.

Revenue from sports betting, meanwhile, was up 4 percent to $4.7 million compared to $4.5 million a year ago.

Following rival 888 Holdings, Mr. Garber said the company is set to launch an Italian sports book after securing licensure from the Autonomous Administration of State Monopolies, Italy's regulatory authority, last month.

The site is scheduled to go live ahead of the 2008 UEFA European Football Championship this June.

"It is good that Party are going to be in the mix in Italy for Euro '08 but they are far from a sportsbetting heavyweight yet," Simon Holliday, a partner with Global Betting and Gaming Consultants, told Interactive Gaming News in an e-mail Saturday.

"Obviously any company over exposed to the Italian market rather than having a more pan European base is at risk of incurring loses [sic] should Italy win the tournament," he said.

With regard to the first four weeks of second-quarter trading, Martin Weigold, the company's chief financial officer, said total average daily revenue slipped 1 percent, reflecting the start of the seasonally quiet period.

Poker revenue was down 8 percent -- “more than expected,” Mr. Weigold observed -- while casino has performed ahead of expectations, with revenue up 9 percent.

“[Concerning poker,] the industry was down about 4% sequentially in April as we saw seasonality kick in especially during the 2nd half of the month,” wrote Mr. Holliday, whose U.K.-based consultancy monitors the land-based and Internet gambling industries.

“Party look as though they have underperformed the market slightly during this BUT it is still early in the period and last year Party were able to hold on better than others in Q2 because they held on to more valuable players and ‘tweaked’ the efficiency of the platform,” he said.

With regard to the company's U.S. affairs, Mr. Garber indicated there have been "advancements" in its discussions with the U.S. Justice Department.

"It's just a question of time and process," he said. "The board has been very proactive in its involvement with outside counsel that have been quite involved with the Department of Justice."

No quarterly dividend was announced as Mr. Garber said the company would deem "dividending out the cash flow irresponsible" in light of a possible settlement with the U.S. government.

Concerning PartyGaming's mercurial share price, James Hollins, an analyst with Daniel Stewart & Co., said the company is likely to benefit from a "short-term bullish catalyst" should it successfully settle with the U.S. government.

In a note to clients, Mr. Hollins retained his "buy" recommendation and 33p price target.

On the London Stock Exchange Friday, PartyGaming was up was up 0.75p, or 3.03 percent, to 25.50.