E-Commerce Vegas Style: The Internet Gaming Companies!
by Michael Ogburn 12/24/98
Hi Ez!
I can't wait till we are able to recover.....I remember talking about buying 10 juniors.....even if 9 go down, a 10-bagger on 1 would allow us to come in even. The juniors are going down in quick succession....now I want to see the 10-bagger!!!!
For now, check our CRY--- Gambling is an interesting business my friend!
The Financial Times projects it will be a $10 billion industry by
the year 2002. PC Computing says it could be twice as big as that by
as soon as the turn of the century. gIth is the wild world of
Internet gaming, an exploding industry of online casinos and sports
books that has grown from little more than a dozen sites in 1997 to
over 200 in 1998. This latest cyber-craze is driven by micro-cap
companies often armed only with software, a website and an offshore
casino base (usually in the Caribbean) – and the desire to parlay
the Internet's reach into big bucks.
The rash of sites offer sports books (betting on athletic events) as
well as virtual casinos complete with craps, poker, blackjack, slots
and any other game you would find at Caesar's Palace. Some even
offer wagering on greyhound racing, and the newest feature allows
betting and live internet simulcasting of horse racing from tracks
across the country.
Noticeably absent from this action are MGM, Circus Circus and the
other big boys of gambling. Legally, they canft run an online casino
from their U.S. base of operations, and most probably don't want to
detract visitors from their billion-dollar gambling facilities.
Instead, the online players range from a former ice-removal
technology company now operating two internet casinos; another that
uses revenues from its adult entertainment site to fund its gaming
ventures; a Belgium e-gaming pioneer (privately-held ICI) that
boasts $120 million in revenues since accepting the first online
wager in 1995; and dozens more, including an Indian reservation
gaming outfit with a Kenny Rogers-endorsed cyber-casino.
The industry is expected to generate more than $500 million in
revenues this year, despite uncertainty raised by the Kyl Bill, a
piece of anti-Internet gambling legislation that stalled in Congress
in 1998 but will likely be introduced again in 1999. And that brings
us to the burning question for many Internet investors: are any of
these publicly-traded companies good bets as investments?
The answer, in most cases, is that you'd have a better chance
cashing in on virtual roulette.
Still, with the ongoing flood of money rushing into the Internet,
there are a few pundits who believe internet gaming may become the
next hot investment sector. If gambling is your game, look over this
review of a dozen publicly traded e-gaming companies before laying
your chips on the table:
The best:
1. Cryptologic Inc. (TSE: CRY) www.cryptologic.com is a Canadian
company whose industry-leading gaming software allows multi-player
games (complete with player-to-player chat) in a 3-D environment.
CRY sells this software to casinos and also is building a solid
e-commerce business through its financial transaction software. This
is one of the few profitable companies in the industry, earning $.61
(Canadian) per share in 1997 and on track to earn $1.50 per share
this year. It trades around $10.50, which reflects a PE of only 7 on
f98 earnings. However the company's stock trades on the boring
Toronto Stock Exchange.
2. Starnet Communications (OTC BB: SNMM) www.starnet.ca Based in
Vancouver, develops and markets interactive media, information
systems, financial services, online gaming software and a number of
online gaming sites. The company funded its foray into e-gaming
through its adult entertainment site revenues, and now is
fully-reporting and slightly profitable, earning a penny per share
in each of the past two quarters. SNMM, which Forbes magazine called
gthe Microsofth of online gaming software, is unique in that it does
not accept wagering from North America (and therefore is not
vulnerable to U.S. or Canadian anti-internet gambling legislation).
SNMM currently trades at around $1
3. Inland Entertainment (NASDAQ: INLD) www.inld.com Based in San
Diego, Inland Entertainment is a leading consultant to Native
American owned casinos. The company currently consults to Barona
Casino, a popular California casino. Inland Entertainment is also
applying its gaming and Internet expertise on the Internet with
three online casinos, kennyrogerscasino.com, casinoaustralia.com and
goodluckclub.com. The sites operate worldwide but do not accept
wagers from the United States. The company was named "Innovator of
the Year" by Internet Gaming International. INLD trades at around
$3.50 per share.
4. GIC Global Intertainment Corp. (OTC BB: GGNC) www.ggncwins.com
Based in Las Vegas, drew much attention to the sector with its
recent stock price run from $.11 in October to over $6 this month.
This recommended buy from the Wall Street Research Report will earn
$.08 from its online casino and sports book in 1998 and projects
$1.50 in earnings next year. That may sound like hype which is an
area where GGNC is an industry leader (witness a recent news release
that compared the cybermall addition to its website to Amazon.com).
GGNC currently trades around $2.
The rest:
- Atlantic International Entertainment (OTC: AIEE): this Boca Raton
outfit's gaming sites include one based in South Africa. Current
price: around $2.
- First Entertainment Holding Corp (OTC: FTET): this Denver holding
company is just jumping into the internet casino website business.
Current price: $.25.
- GLC Ltd. (GLCCF): this UK-based casino software and gaming site
traded as high as 38 before losing its leadership position and
revenue (its net loss is $24 million through the first three
quarters of this year). It currently trades around $6 and a cloud of
lawsuits.
-Global Games (OTC: GLOW): this Minneapolis company is about three
or four promised deals away from becoming profitable. It develops
gaming software, is about to launch a new and improved gaming site,
and is
completing an audit with the hopes of becoming a fully-reporting
company. It trades around $.20.
- Internet Gaming & Communication (OTC: SBET): this Pennsylvania
holding companyfs subsidiary, Intersphere Communications, wrote the
first software ever to accept a wager online. Interspherefs list of
clients includes MGM. The stock trades around $.11.
-Total Entertainment (OTC: TTLN): this New Jersey company has a
gaming site and writes software, and is promoting its product using
Flycast, Netscape, Excite and other prominent web services. Its
stock trades around $.38.
-Venture Tech (OTC: VTEH): this Reston, VA venture fund sold its ice
removal technology and now serves as a holding company for two
online casinos. It trades around $.35.
-Winners Internet Network (OTC: WINR): this Florida firm is trying
to establish itself as the secure banking service for internet
gaming. It has developed a relationship with a Litchenstein bank,
offers a special debit card, and is trying to market its product to
all online casinos. It currently trades around $2.
Finally, for those of you who like to hedge your bet, therefs
Kenilworth System (KENS), a New York firm that emerged from Chapter
7 to offer global betting through closed circuit television
terminals and ultimately, direct digital satellite broadcasts. This
one is available for around $.04.
As one can see, the Internet gaming industry offers many choices –
and more are on the way. Our take is that it may be wise to sit out
a hand or two and ultimately place your bets on the guy holding the
most chips.
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