Neteller

[LemmingInvestor]

I orginally feature Neteller in May 2004 at 193p, the share has blew a gasket at 150% up and still looking to head even higher supported by awaited news from Asia and Durlachers upgrade from £5 a share to £7-£12.

Durlacher updgrade, issued yesterday (?) when price was 435p - 440p

£536.1m Speciality Finance NLR

The decision by Party Poker, the world’s largest on-line poker operator, to seek a UK listing underlines the continued heady growth in the sector. SuperBowl plus a glorious NFL season that saw many of the favourites win, will ensure that Q1 2005 has been a strong quarter.

We recently upgraded our short term price target for NETeller to 500p. However, positive industry news supports a more aggressive target. The current rating of just 16.0 PER to December 2005 is in our view, too low for a business that is effectively a low risk, non-site specific geographically diverse way of playing on-line gambling. By the end of the year we would expect the rating to exceed 25PER or a price target of 700p. Even at 700p NETeller would enter the 2006 year on a prospective PER of just 12.7. Our short term price target is thus raised to 700p and longer term to 1200p.

http://www.uksmallercompanies.com/index/index.php?topic=85.0

 

[LemmingInvestor]

Lemming Investor Feature

Elric Lloyd-Langton
May 9 2004

A keen eye for new opportunities helps when your looking for news potential
high growth areas when searching out the your next investment venture. I believe
that On-line gaming is a high growth area, in terms of the number of cash
transfers. Some investors shy away from investing in pure gaming stocks
because they don`t understand them. Or refuse on morel grounds.

Our latest Company Focus issue is neither challenging your morality, and better still,
it`s easy to understand the business logic. And one that is in a fast growing segment.
NETeller (NLR 193p mid) is an online money transfer service that provides a
secure means of transferring funds worldwide with particular expertise in the online
gaming sector. To date the most receptive market segment to NETeller Group`s
e-wallet concept has been the online gambling market.

Gord Herman who is president and chief executive officer, believes that NETeller
can benefit from the growing abuse related to credit card transactions on-line.
Particular when the on-line community alleged their card has been used fraudulently,
thus refusing to pay up on a lost bet. Subsequently, the knock on effect on the card
issuer has been expensive.

NETeller, operational procedures carries out stringent checks on its customers at the
sign up resulting in 99.9% identifiable and, therefore, liable for their own debts. As a
result, 1,500 of the worlds 1,800 on-line gambling operations are promoting the
NETeller e-wallet as the payment system as a preferred choice.

Originally founded in Canada in 2000, its European arm is based in the Isle of Man
and provides services in Europe, North America, but plans expansion into Asia next
year, where the East Asian communities have a huge appetite for gambling.

NETeller floated on AIM just a couple of weeks ago at 200p which raised £30m for
NETeller and £5m for selling shareholders, and the company was valued at £250m.
Co-founders and existing share holders John Lefebvre and Stephen Lawrence sold
£5m of shares to aid the flotation but have said that they will not to sell any more for
at least a year.

NETeller said they plan to use the money from the fund raising to develop the
company website, and working capital and acquisitions.

NETeller is not a jam some time in the future Tech Company laden with huge debt
mountain. It`s an established lead player boasting 800,000 customers on its books
mostly in the US and signing up c1,800 new accounts each day. In addition, the
company has more than 1,300 Merchants registered to use the NETeller System.
Since processing began in July 2000, an average of 30 new Merchants has been
added each month. Its UK clients include William Hill and Ladbrokes.

On Wednesday 5 May the company announced revenues were up 161% on the first
quarter of last year at $15.4m (c£9m) and earnings before tax 35% higher at $9.3m
(c£5.5m), with growth yet to come from its planned foray into Europe and Asia. It
is not hard to visualize exciting growth.

Gross margins were slightly down; Q1 2004, 69.5%; Q4 2003, 70.7%, against gross
margin for Q1 2003 at 71.2%.

Although the listing on AIM has been seen as a success, the shares have slipped
back 7 points to 193 mid valuing NETeller at £231m. Growth is likely come from its
foray into Europe and Asia as previously stated. But the company could have its
sights set on a complimentary acquisition as a way into new markets. However,
mutterin's are already emerging that the company could be snapped up itself by a
larger rival, or by one of the major credit card operators.

I don not hold shares in NETeller.

http://www.lemminginvestor.com/NETeller.html

 

[LemmingInvestor]

Durlacher updgrade

£536.1m Speciality Finance NLR

The decision by Party Poker, the world’s largest on-line poker operator, to seek a UK listing underlines the continued heady growth in the sector. SuperBowl plus a glorious NFL season that saw many of the favourites win, will ensure that Q1 2005 has been a strong quarter.

We recently upgraded our short term price target for NETeller to 500p. However, positive industry news supports a more aggressive target. The current rating of just 16.0 PER to December 2005 is in our view, too low for a business that is effectively a low risk, non-site specific geographically diverse way of playing on-line gambling. By the end of the year we would expect the rating to exceed 25PER or a price target of 700p. Even at 700p NETeller would enter the 2006 year on a prospective PER of just 12.7. Our short term price target is thus raised to 700p and longer term to 1200p.

No doubt UK investors will continue to doubt the rates of growth but they should note simple credit card processing companies in the USA command prospective ratings around 35 times NETeller is cheap by comparison.

Our estimates do not reflect any additional income NETeller can drive from its recent award of a UK e- Money license (such as direct advertising, loans, mortgages or credit cards) from its existing customer base or the significant upside from the long anticipated entry into Asia. We have not reduced our forecast 10% tax charge despite the Isle of Man, their domicile location, announcing taxation falling from 10% to 0%.

Finally, we met Sportingbet yesterday. We were impressed by their market position and clear continued growth. Numbers in the market appear to be too low. Q1 profits of £5m were followed by £15m which will only be complemented by their Q3 which is normally their strongest period. We believe Sportingbet’s PBT will be around £52m for the year, well above the house forecast. Next year looks set to show significant growth with forecasts around £80m to £85m looking possible. BUY