Small Talk: Probability bets on crazy camels after gamblers get the hump with US laws
Monday 21 January 2008
Probability has not had the easiest of starts to its life on the Alternative Investment Market (AIM), hit by the fallout of US legislation just a week after listing. But with a business model backed by the market and rising revenues, the mobile phone gambling specialist is preparing for one of the industry's showpiece events this week with confidence. A year and a bit on from its listing, Probability is gearing up for its second International Casino Exhibition (ICE) in Earls Court.
The ICE is one of the big-gest gambling trade shows of the year, described by Charles Cohen, the company's chief executive and co-founder, as "an arms fair for croupiers". It showcases the biggest name in world gambling, and Probability is hoping to get noticed as it launches its latest product.
The company provides gambling games including casino, bingo and slots to customers on their mobiles, a market in its infancy. A note from Arbuthnot backed the company and its business model in September, saying: "A combination of improving technology and customer awareness means that mobile gambling is now economically viable." It added that mobile gambling is seen as "the next big thing" in remote gambling.
Probability was first set up as a mobile lottery game, dubbed Mlotto, in 2004, before changing its name the following year. It listed on AIM in August 2006 at 82p after launching its casino suite. The shares rose for about a week, before falling off a cliff. Five months later, its value had more than halved, coming to rest at 39.5p in line with the rest of the sector, hit by the devastating changes to US gambling laws.
Mr Cohen said: "We were an unproven, loss-making business in a sector that was all heat and no light. No one knew the correct valuation of these companies." While it remains one of the smaller names in the gambling universe, the group has raised its profile with several landmark deals. In September, it announced a white labelling contract with Rank Group, to provide mobile gaming for its database of customers. This was followed two months later by a deal with The Sun news-paper and a further tie-up with Orange, part of France Telecom. It has followed this with news that it has developed the first gambling game for the iPhone.
In early December, Probability revealed that its first-half pre-tax losses had narrowed to £600,000 from £2.1m last year. It hit operating profitability for the first time in September.
Since then, the shares have leapt 26p. Probability released its third-quarter numbers last week, in which net gaming revenues rose 38 per cent quarter-on-quarter to £930,198. The market expects it to make a loss this year, but the predictions for 2008 are for the company to turn a profit of about £700,000.
The group's latest game is called Crazy Camels, a variation on the electronic horse-racing games. It has themed the stand at the ICE exhibition accordingly, and even has a real palm tree, although no camels, because – as Mr Cohen said – the smell would clear Earls Court.
The big name gamblers have not become involved in mobile gaming in any meaningful capacity. But a few might look at a takeover of Probability. Mr Cohen remained coy on the subject. "You would have to ask them," he said.
Chances are that foam makers from China have rarely come on your radar as a consumer or an investor. Yet if you've worn a pair of Nike or Adidas trainers recently or possibly slept in a bed from Ikea, you have used FoaMasters International's wares. The group makes foam products and exports them to retailers around the world.
The market will be watch-ing with interest as it posts its first trading update this week since the group came to AIM in December. It is expected to outline its production expansion plans in China and Vietnam, where it employs almost 2,000.
FoaMasters was founded in 1964, and the bulk of its business comes from sales of raw foam, exported to retailers including Wal-Mart. It also makes its own brand bedding products.
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