PartyGaming holds a strong hand for the long haul
The founders of poker websitedealt themselves a Royal Flush when they floated their company on the London Stock Exchange in June and investors who were willing to take a gamble on the internet poker company have been celebrating with them.
Listing at 116p, the shares have since risen to 161½p. While small investors were shut out of the flotation proper, those who followed our recommendation to buy at 129p still have cause to feel pretty happy. Now, however, may be the time to reassess.
Shares often show a high degree of volatility when they first come to the market and PartyGaming is no different. The stock has been bouncing around and has gone as high as 176p.
However, while many shares tend to settle down after a while and find trading ranges there are good reasons for thinking that the volatility in PartyGaming will continue.
For a start there is the questionable legality of its business in the US, where the majority of its players live. While PartyGaming, based in Gibraltar and listed in London, appears to be out of the reach of the US authorities, its players may not be. It is significant that Ladbrokes, with a burgeoning poker business in Europe, will not take business from the US because of concerns over the legal position.
The upshot is that the PartyGaming price is likely to be highly influenced by news from America. Also, while PartyGaming is at present the market leader, there is no shortage of competition out there.
Long term PartyGaming still looks to have a strong hand. It is highly profitable and has grown revenues at a hugely impressive rate. Its financial power means it should be able to hold on to a substantial chunk of the market, although its dominance will likely fade somewhat.
The company trades on more than 20 times forward earnings with a prospective yield of about 1.7pc, but its growth prospects are good. However, after a 25pc gain, it may be wise for investors to book at least some of the profits they have made since the float. Trading in and out of this stock could prove much more profitable than simply holding.
Highbury House
Kelvin MacKenzie has been unusually coy about his intentions for the troubled publisher Highbury House, owner of lads mag Front. The former Sun editor has snapped up another 5pc of the group, taking his holding to just under 20pc. He can only buy another 10pc before takeover rules state he has to make a bid.
Speculation that he wants to get back into the radio industry (Highbury has a small radio business) after losing out in the battle to take over The Wireless Group, the TalkSport owner he founded, is rife.
Highburys certainly not as pretty as some of its Front cover models, but the bid in prospect makes it attractive.
Ultrasis
Work is not getting any less stressful, which is great news for Ultrasis. The £25m company has developed computer-based technology to treat depression and anxiety, and is targeting "Health and Safety Executive and Government initiatives on stress in the workplace".
On Wednesday, 200m shares were traded - 10 times more than the daily average -on speculation that the National Institute for Clinical Excellence was close to recommending the technology. On 2.1p, it may gather momentum but dont expect it to set the world alight.
Roxboro
The specialist electronics company has developed a new type of light emitting diode that can produce more than one billion colours or shades.
The £116m group also plans to rename itself to focus on the fast-expanding electronic lighting market. The group is selling Solartron, which makes electronic measurement instruments, to Ametek, its US-based rival, for £42.1m and will return £46.6m, or 150p a share, to investors.
On 380p, one to keep a dramatic eye on.
2005-08-12
