Casino News: Panmure Gordon issues upbeat news about online gaming sector

Despite the fact that shares in e-gaming have underperformed in the first three quarters of 2011, broker Panmure Gordon is optimistic about financial prospects in the online gambling sector. Shares may have been underperforming in the past 12 months, yet balance sheets are still strong, revenue is growing, and the entire sector is beginning to operate in a more regulated framework.

Panmure Gordon stated, “We think most companies traded strongly over Q3 and valuations appear undemanding,” “However, with earnings difficult to forecast with high conviction as countries move to a regulated and taxed framework, the market is applying a significant discount to our estimate of fair value. We continue to favour a basket approach to the sector as all companies are employing slightly different strategies to achieve the common aim of maximising revenues from regulated markets.”

However, Panmure advised that consolidation remains problematic, especially concerning views between buyers and vendors on price, perceptions of brand value and legacy legal risk.

One particularly rapid change in the online gaming industry is regulation. As 2012 approaches, Greece, Denmark, Spain, the Netherlands and Denmark will all make the move to a regulated environment.

The broker is still suggesting ‘buy’ recommendations for BetFair, NewPlay TV, Sportech and  888 Holdings, claiming that all offer substantial potential. Conversely, Panmure changed the status of Playtech and bwin.party from ‘buy’ to ‘hold’ .

888 Holdings is an ‘opportunity for significant near-term gains’ especially if the firm is able to reassure the market that it has enough cash flow to meet the deferred consideration for the acquisition of a popular UK bingo site.

It remains to be seen what the final quarter of 2011 holds, but if it continues in the manner it has been it could be a good year for online gaming, despite the economic downturn.