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Analyst: Poker Not the Best Bet

13 April 2005

NEW YORK – As reported by CNN: "...Poker is hot, particularly the game known as Texas Hold'em, thanks to TV shows like ESPN's 'World Series of Poker' and Bravo's 'Celebrity Poker Showdown'.

"But perhaps the most successful poker series of them all is the 'World Poker Tour,' airing on the Travel Channel.

"…WPT Enterprises, the company that runs the World Poker Tour, went public last August, as a spin-off of casino operator Lakes Entertainment, and shares have more than doubled since the IPO. So should investors wager on WPT or check the bet?

" …[Dennis Nielsen, an analyst with Feltl & Company] said he is conservatively estimating that WPT will generate about $2 million in sales from the online poker room this year. Overall, he thinks WPT will post about $25 million in total revenues and earnings of 13 cents per share.

"Only one other Wall Street analyst follows the stock and the 'consensus' estimate for WPT is a profit of 18 cents a share in 2005 and sales of $26.8 million. Based on that, the stock is trading at a price/earnings ratio of nearly 90 and a price/sales ratio of 11...multiples that should give even the most skilled poker player reason to pause.

"That's because even if poker doesn't turn out to be a fad that eventually burns out, there are still many risks in the stock that are worth noting.

"…For one, short sellers, investors who think that a stock is going to fall in the near-term, have pegged shares of WPT as an easy mark.

"…Nielsen also noted that some insiders, including CEO Steve Lipscomb, have sold sizable amount of shares lately.

"Finally, it's uncertain whether online poker will ever be a huge generator of profits for WPT…"

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