Stockreporter.de > Recommendation > ABET
10-26-1999
Stockreporter begins coverage of 649.com, Inc. (ABET) with a strong buy
recommendation and a conservative price target of $ 5.00per share and a
Year 2000 price target of $ 9.00
COMPANY OVERVIEW
649.com Inc. is a Texas based company in the business of developing and
operating a unique method of playing 6/49; where a person picks six numbers out
of 49 and potentially instantly wins $5,000,000. The uniqueness is that the game
is played on the Internet as well as on stand-alone video lottery machines.
The drawings are instantaneous. As soon as the player selects six numbers either
manually or through a random generator, the six winning numbers are displayed.
The jackpot is $5,000,000 for selecting six out of six and is available every time an
individual plays the game. A person literally has his/her own "private lottery" and
the results are instantaneous?like playing a slot machine but for much greater
stakes. There are multiple cash and major prize awards for matching three, four or
five numbers.
Each play costs the participant $5.00 and is debited from the individual?s account
which is established with 649.com and secured by a major credit card.
Persons living in jurisdictions where online gaming is restricted or prohibited may
use the free play section of 649.com, with the chance of winning a major prize.
Matching six of six numbers gets you a major prize such as a luxury automobile.
The cost of prizes awarded to free players is offset by revenue generated by
649.com Website banner ads.
649.com Inc. is dedicated to giving Internet gamblers access to a simple, easy to
play 6/49 lottery over the Internet. People can enjoy its services from wherever
they have Internet access; the privacy of their own home, while taking a cruise, or
sitting in their office.
649.com will place stand-alone 6/49 video lottery terminals (patent pending)
wherever slot machines are permitted. The video lottery terminals will resemble a
video poker machine in physical appearance. Their flashy on screen graphics,
flashing lights, exciting sounds, and the hope of winning $1 million dollars instantly
for a $1 bet will make them very appealing for people to play.
Three patents pending have been filed covering the concept of an instant draw after
each bet. These patents pending cover, playing for money, playing for free, playing
on the Internet, or playing on the video lottery terminals.
The 649.com Web site is now open and may be accessed at 649.com.
Mindquake Software, Inc is designing and testing the proprietary lottery software.
An in house pre-Beta test has proved extremely successful and a public Beta test
is scheduled to occur later this month.
This process will eliminate any existing bugs and ensure software reliability as
well as gather input from the public as to ease of use, impact of special effects,
etc.
It is anticipated that players will be able to access the 6/49 on line lottery in the
very near future; certainly before the year is out.
The Company?s software development operations are located in Vancouver,
Canada and the gaming website management facility is in San Jose, Costa Rica.
Costa Rica has an excellent telecommunications network making it an ideal
location for an Internet venture.
COMPANY UNIQUENESS
The online 6/49 lottery is unique in the market in the size of the prizes and the
instant feedback given to the player. Also, while other companies are requiring
their players to download large software files, 649.com have decided to go with a
browser based game. All a player has to do is log on to www.649.com and the
game will appear right in their browser.
By allowing people to play without downloading game files 649.com?s lottery is
easier to play, thereby increasing player numbers. Another big reason for having
the games browser based is the ease of upgrade if necessary. Whenever there is
an upgrade to the lottery software available 649.com needs only to upgrade its
server. It won?t be necessary to mail out a CD-ROM with the files on it to players,
keeping operating costs low.
The Company completed its patent pending filing in June of this
year. Titled
"Method And Apparatus for Conducting Instantaneous On-Line
Lotteries" (serial
No. 09/339,256), the patents cover 649.com?s unique method of
playing 6/49 for
money and for free both on the Internet and on stand alone video
lottery
machines.
All aspects of 649.com Inc.?s operating system are expected to be Y2K
compliant.
MARKET AND BUSINESS STRATEGY
649.com Inc?s potential client base will include all persons of legal gambling age in
the world who logs on to the Internet. This figure is growing fast. In 1997 the
number of adult users online worldwide was estimated at 57 million, and growing
at an average of 39% per annum. By 2001 there will be an estimated 194 million
adult users of the Internet.
Just as the number of adult Internet users is growing, so is the annual revenue of
Internet casino games. In 1997 there was less than $1 billion dollars wagered
online. By 2001 that number will increase to $8 billion, and by 2002 it is expected
to grow to a $10 to $20 billion dollar industry.
649.com Inc will be targeting the following markets; Europe, Asia, Central
America, and South America. These regions make up 45% of the Internet users
worldwide as well as being the world?s larger gamblers.
The marketing plan being put into effect by 649.com will include strategically
placing banners on already existing high traffic gambling specific sites and
purchasing key words on the top search engines. The web-site will be heavily
promoted primarily through the Internet.
649.com intends to continue to grow by opening additional on-line games and
acquiring and licensing proprietary on-line gaming technology. Lawrence Burridge,
CEO of 649.com states, "It is our view at 649.com, that the Internet is radically
changing traditional gaming. We can and will continue to acquire products that are
very entertaining. The Financial Times has estimated that the Internet gaming
market will yield annual net earnings of $ U.S. 10.2 billion by the year 2002. We
are making sure our company is positioned properly to take advantage of that.
With a chance to win $ 5 million USD with ?instant draw, instant pay concept?, we
expect to see some serious traffic at our site?."
KEY MANAGEMENT
Lawrence P. Burbidge, President and CEO, was formerly executive vice president
of a major Canadian trust company where he managed an asset portfolio of over $
5.5 billion and a staff of 250 people. He has a strong background in all phases of
the financial services sector with particular expertise in business development.
Brandon L. Moase, Vice President of Operations, has a solid background in the
gaming and lottery industry and in depth marketing and technology management
experience.
FINANCIAL PROFILE
Authorized Shares: 250,000,000
Outstanding Shares: 19,975,650
Active Float: 500,000
Current Share price: $1.00
Earnings Projections:
The following projections reflect revenue and earnings from on line lottery activities
only. The Company has not forecasted revenues from stand alone lottery
machines or additional new product spin-offs. 649.com conservatively projects to
acquire 1,000 new accounts a month, until 18,000 accounts are reached.
Monthly income from on line wagers is expected to be $2,700,000 with banner ad
revenue adding another $100,000. About forty five percent of revenues are
expected to go to prizes and ten percent to expenses. Consequently margins
should be an impressive 45%.
Earnings Estimates (from 6/49 on line lottery only):
Gross Revenues
Year 2000: $ 20,000,000
Year 2001: $ 35,000,000
Net Earnings
Year 2000: $ 9,000,000
Year 2001: $ 15,750,000
Earnings Per Share
Year 2000: $ 0,45
Year 2001: $ 0,79
EVALUATION AND OUTLOOK
649.com (ABET) stock is just an outstanding buy for the investor looking for rapid
appreciation within the next 12-24 months. Anyone who has been to Las Vegas or
Monte Carlo has seen the fervor with which slot machine players feed their money
into the machines. Couple this with the explosion in lotteries and lottery revenue
and the human need for instant gratification and you have a glimpse of 649.com?s
sure win business.
Even with its competitive advantage the Company?s earnings projections are quite
conservative and do not include revenues from other existing and future products
and services.
Our usual application of multiples to a business of this kind would generate share
value projections that are almost out of sight. Therefore we used an extremely
conservative 20X multiple to predict share prices of $9.00 for 2000 (based on an
EPS of nearly $0.45) and $16.00 for 2001 (with an EPS of $ 0.80).
With the online lottery probably up and running before year-end, demonstrating
that the business is real and the technology works, we see the stock value
approaching $5.00 in short order.
Currently at $1.00 ABET is a great bet and deserving of Stockreporter?s "strong
buy" recommendation. |
