Today, Cryptologic announced that YTD revenues are up 100% over last year. Also, they gave some parameters around the potential loss of Betfair as a client. Cryptologic and Betfair will extend their relationship through 2006. Here is a key statement from the press release:
WagerLogic's central poker room, shared by all of its poker licensees, continues to be one of the fastest-growing poker rooms on the Internet. Excluding Betfair, revenue from WagerLogic's other poker licensees is up approximately 100% on a year-to-date basis over the same period in 2004. Although Betfair fees have typically accounted for 5-10% of the company's revenue, CryptoLogic expects to continue its record of profitable growth from strong poker revenue from continuing licensees, healthy results from its core casino business, and the potential signing of new licensees that meet the company's rigorous criteria.
A warning about the Betfair relationship sent Cryptologic stock diving from around $30 back in August to the current level of $16. As the Motley Fool pointed out back in August ("We Told You Small Caps Are Volatile"), the market reaction was way overblown. The press release indicates other growth has more than compensated for the loss of Betfair in 2007 - and Cryptologic will still gain $3-5M in revenue from Betfair in 2006.
Furthermore, Cryptologic announced a 10% stock buyback, has a trailing P/E Ratio of just under 15, and has a 12-month stock price target of $23 (but this could go up given the revenue growth). Finally, Cryptologic pays a dividend that currently yields 1.2%, comparable to most savings accounts.
Is it time to gamble on Cryptologic? We think so.
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