This was in the Local Sunday Paper
I don't think ONPT is going to anything over the internet
DON BAUDER
Falling gambling stocks pinch baby's new shoes
DON BAUDER
04-Apr-1999 Sunday
San Diego gambling stocks are crapping out.
Most are trading near their lows, and one hit a new low Thursday, even
though some are booking improved profits.
In general, gambling stocks are up this year, but still down sharply from
past years. The Standard & Poor's index covering gaming, lottery and
parimutuel stocks is up 20.3 percent this year.
However, the index closed 1996 at 107.81, closed 1997 at 100.94 and closed
February of this year at 86.47.
Although gambling revenue has been surprisingly strong this year, there is
a feeling that Las Vegas is saturated, that lotteries are losing their
luster, at least in the U.S., and that with almost all states offering
gambling in one form or another, the thrill of forbidden fruit -- say, the
three cherries that make those coins roll out of slot machines -- is
waning.
Shares of International Lottery & Totalizator Systems in San Diego, the
maker of computerized wagering systems, closed Thursday at 31 cents,
unchanged from the previous day, barely above its low of 29 cents on March
5 and a long way from its all-time high of $12.60 on March 3 of 1995.
Stock of Inland Entertainment, the consultant to Barona Casino, Web site
developer and consultant to three Internet gambling operations, closed at
$2.25, down 25 cents. That's a nickel below its previous low of $2.30 in
February of last year and well down from its high of $9.59 in May 1995.
Shares of Virtual Gaming Technologies, which conducts online gambling from
the Antigua tax haven, closed at $4.44, up 50 cents, down sharply from the
high of $9.35 in May of last year but above the low of $1.71 in spring of
1997.
Stock of On-Point Technology Systems, maker of instant-ticket lottery
machines, is somewhat an exception to the rule, largely because its
fortunes have improved. The stock closed Thursday at $1.88, down 6 cents
and down from the all-time high of $4.34 in early 1995, but up around 30
percent from last fall.
Chief executive Frederick Sandvick came to On-Point in 1996, when costs
were out of line. "The company had lost $8.5 million two years in a row,"
he recalls. "We right-sized the company in 1996 and 1997," and things
improved.
For the fiscal year ended Dec. 31, 1998, net income rose 9 percent to $1.71
million, even though sales declined and research and development spending
soared. Earnings have now risen for three straight years.
The company recently got a fat contract from France, which has the largest
instant-ticket lottery business ($3 billion annually) in the world. "Over
the next three years, they will order only from us," Sandvick says.
This summer, "we are going to re-attack the market (domestic and foreign)
with the next generation of machines," Sandvick says, and at that time, he
says, the stock market might notice the company's headway.
"Sandvick has done a heckuva job cutting cost, providing focus," says Bud
Leedom of San Diego Stock Report. "The deal with the French should bring in
a lot of revenue."
Meanwhile, for its second quarter ended Dec. 31, Inland reported a loss of
$899,000, although revenues grew from $3 million a year earlier to $3.5
million. It lost money for the last six months, too.
Among other things, says Andrew Laub, Inland's chief financial officer, the
company spent $800,000 on political contributions: $500,000 on Prop. 5,
last fall's Indian gaming initiative, and $300,000 "for additional
contributions related to the general California election."
Inland gets 89 percent of its revenue from American Indian gaming, 8
percent from a Web site producer named Cyberworks and 2 percent from
serving as a consultant to Internet gaming sites.
One of those sites is named for singer Kenny Rogers, who until last week
was the major voice in advertising for the Barona casino. "We are still
encouraged about Internet gaming," says Fritz Opel, executive vice
president.
Congress is considering whether to ban it in the United States, and because
it's now a gray area legally, Inland says its Internet customers are all
foreign.
Virtual Gaming also says it accepts bets only from non-U.S. citizens. In
its fiscal year completed Dec. 31, the company lost $3.9 million on
revenues of $262,000, compared with a loss of $5 million on revenue of
$3,600 the previous year. "We're still in the development stage," says
Bruce Merati, chief financial officer.
The company offers cyber casino gambling in English, Japanese, Korean,
Spanish, Portuguese and Chinese and has introduced unusual wrinkles: For
example, its customers placed bets on the outcome of Clinton's impeachment.
One reason Virtual Gaming stock is down, Merati says, is "people don't
understand the potential of Internet gaming companies."
International Lottery has been a yo-yo stock for years -- up, down, up,
down. Last year the company whacked employment, and there was a 3 for 1
reverse split of the stock.
However, the shares, which once traded on the Nasdaq National Market, are
now on the Bulletin Board. In December, the company couldn't qualify the
stock for the Nasdaq SmallCap Market.
The company has recently had good news: Fourth quarter revenues jumped 52
percent as the company turned narrowly into the black. It has had two
straight profitable quarters.
Still, it hasn't had a profitable year since 1993, says Dennis Klahn, chief
financial officer, who blames the low stock price on both the dismal
results and Bulletin Board listing.
Leedom of San Diego Stock Report says the "company has no set direction."
Meanwhile, the analyst says that expenses at Inland -- it had "a cash cow
with Barona" -- have gone up sharply because of its Internet gaming
adventure.
"I don't know that the whole strategy will pay off," he says.
Don Bauder's e-mail address is don.bauder@uniontrib.com |
