PartyGaming Likely to Beat Estimates on Poker, Casino (Update3)

Dec. 8 (Bloomberg) -- PartyGaming Plc, the world's largest online poker operator, expects full-year profit to exceed analysts' estimates after customers played more poker and started trying new casino games such as blackjack. The shares jumped.

Daily poker revenue increased 14 percent to $2.67 million in the two months ended Nov. 30 compared with the average for the previous quarter, Chief Executive Richard Segal said today on a conference call. Daily casino revenue was as much as seven times higher than the average for the third quarter at $1.2 million after the company introduced blackjack on Oct. 8, he said.

``This is good news for the whole online gaming market,'' said Andrew Lee, an analyst at Dresdner Kleinwort Wasserstein in London with a ``buy'' rating on PartyGaming stock. ``Growth is not only fuelled by blackjack, but by underlying poker revenue.''

PartyGaming is returning to favor with investors after signs of a slowdown in revenue growth caused its stock to drop below the price of June's initial public offer. Investors applied for three times more stock than was available in the $1.9 billion share sale on expectations that the popularity of online poker will spur growth in an industry that's expanded 10- fold in three years.

Shares of PartyGaming rose as much as 10.5 pence, or 9 percent, to 127.5 pence in London and were 125 pence at 9:50 a.m. local time. The stock was sold to the public at 116 pence a share and climbed as high as 176 pence in July. It slid below the IPO price on Sept. 6 as the company said revenue missed forecasts.

Empire Online

Revenue growth accelerated after PartyGaming in October switched its 9 million players to an upgraded platform that excludes marketing partners such as Empire Online Ltd. Empire this week sued the company for alleged breach of contract. PartyGaming is ``highly confident'' of a successful outcome to the litigation.

``Moving PartyPoker to its own platform has allowed us to introduce blackjack and a variety of other new features, all of which have been very well received,'' Segal said. About 40 percent of customers now play both poker and blackjack, he said.

PartyGaming expects to beat consensus analyst estimates for revenue of $917 million and earnings before interest, tax, depreciation and amortization of $527 million in the year ending Dec. 31, Finance Director Martin Weigold said on the call.

Dresdner's Lee increased his estimate of revenue to $961 million from $927 million, he wrote in a note to clients. His estimate for Ebitda rises to $536 million from $516 million.

Regular Users

``PartyGaming has clearly benefited from the separation of the poker operating platforms and the subsequent introduction of blackjack onto PartyPoker.com,'' said Simon French, an analyst at Numis Securities in Liverpool, in a note to clients.

PartyGaming controls 51 percent of the online poker market. The number of days that regular users played poker in the last two months rose 38 percent to 8.4 million, the company said. The average number of new players signing up to PartyPoker.com was in line with the company's estimates at 2,455 per day. PartyGaming is targeting 800,000 new poker players for the year.

The poker industry has grown as events including the World Series of Poker encourage more people to play games such as Texas Hold'em online. About 29,000 players competed for more than $103 million of prize money at this year's tournament in Las Vegas.

According to research company Christensen Capital Advisors, online poker grew to a $1 billion business in 2004 from $90 million in 2002. The industry's growth will slow to 60 percent in 2006 and to 30 percent a year later from 130 percent in 2005.

The number of days that users played casino games increased to 1.6 million in October and November, PartyGaming said.

``Blackjack has significantly exceeded our expectations,'' Segal said. ``We expect blackjack to continue to deliver a substantial amount of revenue in future, although not at the novelty enhanced levels attained in October and November.''

PartyGaming plans to introduce more casino games onto its platform next year, Segal said. The company will also consider acquisitions to broaden its geographic and product offer, he said.

PartyGaming earns 87 percent of its revenue in the U.S., where the Justice Department considers online gambling illegal.

- 2005-12-08 06:53:50