by Renee Israel
Paddy Power, the Irish gambling group popular for its online gambling and
land based operations, saw its share prices slump in Dublin this week.
The drop of up to 5.2% was the result of two separate incidents - a
recommendation by the Bank of America Corp. and recommendations by an Australian
committee on gambling.
The Bank of America Corp. cut its recommendation for Paddy Power's stock to
"underperform" from "neutral". The BAC listed reasons such as the fact that the
group's profitability could be affected by new taxes in the United Kingdom from
2014, which could see Paddy Power paying 15% to the government.
As a result of the US recommendation, Paddy Power saw its stocks fall the
steepest since August 4th.
Another reason for the Paddy Power shares slump is the fact that an
Australian parliamentary committee decided that a live on in-play online
gambling be upheld in the country.
The report issued by the parliamentary committee is non binding and analysts
say that its recommendations won't have an affect on Paddy Power's assets.
Nevertheless, the report did affect share prices this week.
Online Gambling Generates Profits for Paddy Power
According to Paddy Power's latest financial reports, its online gambling
operations in the United Kingdom and Australia generated 81% of operating
profits in the first half of 2011.
It was less than one month ago that the Irish bookmaker Paddy Power saw its
shares rise by 5.7% in Dublin after releasing a bullish trading statement. In
the same report, the group announced the purchase of a gaming software in
Paddy Power purchased CT Networks Ltd, a casino games developer which is
located in Sofia but has its headquarters on the Isle of Man.
The Irish group said that the management team would remain in place, but
would not disclose the final price paid for CT Networks.
In the November 16th report, Paddy Power said that the amounts staked on its
sports book platform in the UK and Ireland, increase by 31%, while its
gaming/business to business revenues climbed 33%.
The group said that the Irish gambling market continued to be competitive.
"It continues to be very tough," said the Chief Executive of Paddy Power,
Patrick Kennedy, at the time. "Irish retail was the only negative figure on the
Paddy Power predicted that its underlying diluted earnings per share would
grow 15 - 20% this year, compared to numbers in 2010.