(updates with Deutsche Bank, Dresdner Kleinwort reaction)
LONDON (Thomson Financial) - PartyGaming PLC, the UK-listed online poker firm, reported a 24 pct increase in third quarter net revenue compared with the previous year and said it is confident about prospects for the full year.
Third quarter net revenue totaled 115.7 mln usd, including a 3 pct reduction in poker revenue to 74.8 mln usd, a 158 pct rise in casino revenue to 36.7 mln usd, and a 91 pct increase in sports betting revenue to 4.2 mln usd.
Compared with the second quarter, total revenue rose 5 pct, with poker up 3 pct, casino up 3 pct, and sports betting up 100 pct.
Growth was achieved despite a 14 pct reduction in yield per active player compared with the previous year, reflecting the loss of a number of higher value players following the passing of the US Unlawful Internet Gambling Enforcement Act in Oct 2006.
That legislation forced PartyGaming to close its US-facing operation.
PartyGaming achieved average daily revenue of 1.26 mln usd during the third quarter.
The group said the volume of new player sign-ups in what is a seasonally quiet period was down 14 pct compared with the previous year and 18 pct versus the second quarter.
However, it pointed out this was after a particularly strong first half in 2007 and said, for the year to date, the number of new player sign-ups was still 44 pct ahead of the same nine-month period in 2006.
PartyGaming said the number of active players and daily average players both grew strongly year-on-year but were down versus the previous quarter which had been boosted by very strong growth in new player sign-ups in the first half but also reflected a reduction in the frequency of play, particularly during the peak European holiday season in July and August.
The group said a recovery in player yields meant that, overall, net revenue per day in the third quarter averaged 1.26 mln usd, up 4 pct on the previous quarter and 24 pct year-on-year.
PartyGaming said it remains confident about prospects for the full year and beyond.
In the first three weeks of the fourth quarter, average gross daily revenue increased by 9 pct from the third quarter to 1.593 mln usd, reflecting the normal seasonal pick-up seen in previous years.
In poker, new player sign-ups averaged over 1,300 per day and there were, on average, 65,000 active players per day, generating average gross daily poker revenue of 938,000 usd, up from 897,000 usd in the third quarter.
In casino, average gross daily revenue increased to 569,000 usd in the third quarter.
In sports betting, gross win per day increased to 85,000 usd from 52,000 usd in quarter three.
At 9.50 am, shares in PartyGaming were up 1/2 pence at 28, as the market reacted positively to the update.
Numis analyst Richard Carter described the performance as 'solid' and in line with market expectations.
'We think Party's Q3 trading update should help to reassure investors and we would anticipate Party shares opening up higher this morning,' he said.
Numis repeated its 'buy' recommendation and 42 pence target price.
Carter reckons PartyGaming's update should also have a 'positive read across' for 888, which is scheduled to report third quarter trading next Tuesday. He has a 'buy' recommendation and 172 pence price target on 888.
Dresdner Kleinwort reiterated its 'buy' stance and 60 pence price target on PartyGaming, saying it continues to see 'significant growth drivers' for the group.
'The group's core product, poker, importantly continues to grow and our forecast of 39 pct year on year growth in Q4 suggests poker is a long way from maturity,' it said.
Outside poker, Dresdner said the group remains at early stages of growth, with casino and sports betting expected to be more heavily marketed from Q4 2007.
Deutsche Bank also takes a positive view, with a 'buy' recommendation and 45 pence target price.
It reckons there is 'considerably more to come from the sportsbook' in the fourth quarter and 2008. PartyGaming is planning to introduce new sportsbetting products in Q4. matthew.scuffham@thomson.com msc//msc/ro/msc/slm COPYRIGHT Copyright Thomson Financial News Limited 2007. All rights reserved. The copying, republication or redistribution of Thomson Financial News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Financial News.
© 2007 AFX News
