Stock markets have always had their sexy, exciting sectors. If you can identify these sectors early enough and pick the darlings within you are on your way to unearthing exciting companies. The oil & Gas sector has been the gusher of 2004/05. The darlings I have took a shine to include Burren Energy, up 129%, JKX Oil & Gas up 720%, Dragon Oil up 521%, Emerald Energy up 26% and Petrel Resources although down 107% but well off its 350% high. Although oil & Gas is still an exciting sector, a new exciting sector is developing-rapidly.
On-line gambling and land based gambling.
To date we have covered several companies directly within or complimentary to the industry. London Clubs Int, up 154%, ukBetting, up 14%, NETeller up 281% and Cryptologic Inc up 168% and Gaming VC, currently down 26%.
The booming world of Internet gambling is where it is happening, an estimated $7.5 billion business that is expected to more than double over the next five years. Rapid growth and a low cost of entry are drawing in investors, but they also raise the prospect of trade battles among the United States, UK and Continental countries that don't see eye to eye on gambling - or on regulation of the Internet.
In a chaotic attempt to bring British casino laws into the 21st century, the Government has taken steps to lure online casino operators to UK shores. Several well know companies already have on-line casinos established off shore. Gibraltar is the preferred location for some. The main reason for the change in legislation is not for regulatory purposes, but vital revenue the Government are loosing out on.
The main battle is in the US where there is a ban in most states. The US has been a heated battleground surrounding moral issues for a few years now. An estimated 20 million Americans - well over half of those betting globally - visit online gambling sites, the Bush Government wants to keep the ban in place, arguing that Internet gambling threatens public morals and contributes to the spread of crime.
UK listed companies to benefit
UK based companies are seeking ways to step up their presence within the US and take a share of the US market. These offshore operators include Gibraltar-based PartyGaming, which is expected to float on the UK market, another on-line casino, 888.com is also eyeing a London listing, and the Costa Rica-based Paradise Poker, a subsidiary of the London-based Sportingbet, its market share continues to grow. Some online casino businesses, like the Internet casino subsidiary of the British betting shop Ladbrokes, say they decline to do business with U.S.
One of the tools used to prevent US citizens from gambling on-line has been the ability persuade some credit card companies from allowing their cards to be used for on-line gambling. NETeller has provided a back door for determined gamblers with their e-wallet money transfer system. Although there is widespread competition for internet money transfer systems, NETeller is the leader. Another company profiting from the gambling craze is Canadian, London listed Cryptologic. The company also has a on-line money transfer subsidiary, E-cash direct. The company also supplies gaming and auditing software for the growing market.
Market
The US is the biggest market for on-line gambling with an estimated 70% of all on-line accounts. The business is growing in Europe and Asia. UK gambling companies are lobbying the European Commission to include the industry in new rules aimed at creating a single market for services across the 25-member bloc. The US Government argue they are seeking a ban on on-line gambling because it sees it as the best way to curbing money-laundering and organized crime as well as at keeping betting out of people's homes, where children might become addicted to it. But online providers say that is precisely why U.S. authorities should bring the industry onshore, where they can monitor it more closely, as is being done in the UK. It will be at least a year, analysts say, before the new British law is implemented, but it could put the country squarely at odds with Washington if UK-based operators eventually use their newfound respectability to try to challenge the U.S. restrictions.
Acquisitions
Stanley Leisure tried to acquire London Clubs for 25p a share and 90p in the £1 of debt almost two years ago. Stanleys themselves are subject to rumoured bid by Asian conglomerate, Genting Gaming, whom have been moping up shares in London Clubs as well - owning 29.9% of the stock, just below the 30% needed before a formal bid is required.
The gambling sector as a whole is on the change and nothing is certain. Goal posts have been moved several times now for the land based casino operators whom have been seeking more regional casinos where they can permit sportbook betting and link premises with a joining bingo sites to attract new business. However, the future is far from certain.
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