If ELOT is worth $80.00 what is VGAM worth?
E-gaming prospects boost one stock
By Thom Calandra, CBS MarketWatch
Last Update: 3:13 PM ET Jan 13, 2000 FTMarketWatch.com
Thom's biography
SAN FRANCISCO (CBS.MW) -- Are Internet gaming stocks poised for a roll?
Bear, Stearns gaming analyst Jason Ader, in a report this week, says expected revenues from gaming sites on the Web could grow to more than $3 billion in 2002 from $1.2 billion in 1999. There are more than 650 of the sites, by Ader's count. These include sweepstakes sites, lottery wannabes, electronic game sites and Internet casinos, this last facing legal challenges in the United States.
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"E-gaming has the potential to be everywhere on the Web," Ader and another analyst, Marc Falcone, said in the Bear, Stearns research report, parts of which were distributed by Business Wire. "It is not unrealistic to believe that someday when you buy a CD on line you will also get a chance to spin a roulette wheel for extra discounts."
Ader and Falcone cited a range of companies, some of them little-known Nasdaq bulletin board stocks. They included Online Gaming Systems (OGAM: news, msgs) Cryptologic of Canada, and Starnet Communications International (SNMM: news, msgs). Companies with full Nasdaq listings included American Wagering (BETM: news, msgs), YouBet.com (UBET: news, msgs) and eLOT Inc. (ELOT: news, msgs).
Which brings us to eLOT, once a part of telephone equipment company Executone Information Systems. (Executone earlier this month completed the sale of its computer telephony division for $44.3 million in cash. Shares of eLOT have more than doubled since Dec. 8 and now sell for about 6 1/4, giving the company a market capitalization of about $400 million.
Bear, Stearns will host an Internet gaming conference in Las Vegas in February, and eLOT executives from the company's eLottery Inc. subsidiary will appear on a panel there, says fund manager Andrew Shapiro, one of eLOT's largest shareholders.
Value guy and his view
"I'm very uncomfortable telling people they should buy or sell a security," Shapiro told me right off the bat. "Still, relative to other Internet stocks, this company is undiscovered. Discovery and analytical attention and discussion about a company creates efficiency in a company's shares."
Lawndale Capital Management manages about $30 million and specializes in investing in undiscovered companies or shares that aren't trading efficiently. "I'm a value guy," says Shapiro, who is based in San Francisco.
The company's www.eLotteryFreeWay.com two-month-old Web site offers free lottery and e-games, then gives players points that can be redeemed for cash or merchandise. The site in about seven weeks' time registered 6 million impressions and registered 24,000 players.
Visitors to the so-called lottery freeway spent an average of three hours each on the Web site, eLOT said this week. That's what folks like Shapiro call "stickiness." See earlier StockWatch on Shapiro and eLOT.
"Most of the other e--gaming sites are paying people to acquire eyeballs," said Shapiro. "This company has an ability to acquire eyeballs." On the Internet, eyeballs often translate into advertising revenue.
Shapiro said that eLOT, which hopes to provide lottery services for states and countries, ultimately will benefit from Web buttons that say, in effect, "After you finish playing the lottery, come play this game for free."
"The stock may be acting well but this investment is far from being discovered by Wall Street. Most are here for the potential of lottery distribution contracts and are missing real value in the freeway Web site," he said.
The Connecticut company is working on possible government contracts to operate lotteries via the World Wide Web. Legislation in Washington could exempt state lotteries in the United States from restrictive Internet gambling laws.
The company recently signed a contract to operate the Jamaica lottery. Plus, an eLOT pact with the state of Idaho -- to develop an Internet strategy for a lottery -- could result in an online lottery. See the company's statement.
Otis Bradley, who follows the company as an analyst, is even more optimistic.
"The lottery business is about $120 billion worldwide, and when it goes on the Internet that number will get jacked way up," said Bradley of Gilford Securities in New York City. "ELottery," Bradley told me, "could get 60 percent of the Internet lottery business. They have the technology."
Bradley, in a research report, has a price target of $80 a share for eLOT. That's right, folks: $80 a share.
Shares of eLOT Thursday morning rose 1/2 to 6 1/2.
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