Party Poker's latest results

[TightEnd]

Shares currently 121p....I remember saying Blackjack would lead to short term share price rises... , perhaps this belongs on the betting board

My thoughts:

PartyGaming has enjoyed a strong Q4. Revenue forecast upgrades driven not only by the black jack click-through, but also strong poker customer growth and yield increases despite the cannibalisation impact.

Average gross daily poker revenue in Q4 to date of $2.67m is 14% ahead of Q3 with the daily average number of players up 5% and yield per active player day (net of bonuses) also up an estimated 5%.

Since the introduction of blackjack onto the poker site on 8 October, c 40% of PartyPoker players are playing both poker and blackjack with modest revenue cannibalisation at this early stage.

This cross-selling benefit is reflected in active casino player days which have risen to 1.6m in two months versus 185k in Q3. With gross casino revenues of between $0.8m-$1.2m per day, this is around 500-700% higher than during Q3.

The bear stance on this stock has been three-pronged.

1) Poker is ex-growth

2) Yields will fall

3) Margins are unsustainable.

In the short term these fears have been somewhat dispelled:

1) Q4 (to date) gross poker revenue has grown 14% QoQ and active player days are +38% YoY. Other key players, such as Sportingbet, also continue to demonstrate strong poker growth

2) Q4 yield per active poker player day has risen 5% QoQ to $17.4. (And poker growth rates are despite the cannibalisation of poker revenue by the black jack click-through)

3) Margins are expected to be 57.6% for the full year (H1: 58.9%) despite a sharp increase in staff costs post-IPO. The key metric, distribution costs (which includes marketing and affiliate costs), is expected to be flat /H1.

It is becoming increasingly evident that the online gambling market is about scale, liquidity, brand, trust and cross-selling and not about single products.

Further consolidation in the market is inevitable.

[RED-DOG]

What he said

[owner]

TE,

What do you think about the empire lawsuit, just a load of bluster ?

[Sheriff Fatman]

TE,

What do you think about the empire lawsuit, just a load of bluster ?

Reading the FT article this week it seems that the case revolves around whether the segregation of the skins relates to an actual breach of contract by Party or whether it was within their terms.  Empire stated in their listing prospectus that a withdrawal of support by Party would not have a material impact on them.  They are now claiming that this meant a withdrawal in line with the terms and conditions as they were understood to be.

Basically, if Party's withdrawal was within the T&C's then it would look to me that Empire don't have much of a case.  They need to prove that Party breached their contract to have any chance of success.

Sheriff

PS:  TE, does the 40% figure relate to Blackjack only or Blackjack and the side bets?  I find it hard to believe that 40% of the players would start playing BJ on there but I know that there was some interest initially in the side bet feature.  Also, customer growth in this period will undoubtedly relate to rakeback players going back there on new accounts following the withdrawal of the skins.  Party are dead-set against rakeback but, from what I picked up on 2+2 at the time, practically everyone tried to get a new deal by signing up again anyway!