Buffettique Discussion Threads

[liarspoker] 09/4/2008 09:20

Buy and hold lads - the tricks of Anne Scheiber:

[liarspoker] 07/4/2008 15:27

This one is new:

[gsands] 26/3/2008 14:29

Reply posted on the PRTY thread.

[liarspoker] 26/3/2008 13:53

What are your thoughts on management GSands ?

CEO stepping down after only 2 years and another director helping himself to a load of options. Seems like they are looking after themselves and not the shareholders.

[gsands] 26/3/2008 13:21

Immediately upon the enactment of the UIGEA on 13 October 2006, PartyGaming stopped customers in
the US from playing or making deposits on any of the Group's real money sites. This is despite the fact
that a number of other online gaming companies have chosen to continue to offer real money games to
customers in the US. During 2007, legislative proposals were introduced in the US that seek to move
away from prohibition towards a properly regulated framework for online gaming in the US under which
operators would be licensed, regulated and taxed. However, the impending Presidential election in the
US may mean that little, if any, progress will be made on reviewing these proposals until after the election
in November 2008 and therefore the prospects of success for any of these measures remains uncertain.

Page 5

[gsands] 26/3/2008 12:52

Liarspoker,

To answer some of your questions:

1.Correction: The company has no debts. It has net cash of c$130m

Net cash1
As at 31 December 2007 the Group had net cash of $127.8m (31 December 2006: $43.4m). Following
the enactment of the UIGEA and subsequent discussions with its bankers, the Group's multi-currency
revolving credit facility was repaid in full and cancelled on 12 April 2007.
1 Net cash is defined as cash, cash equivalents and short term investments less bank debt Page 18 of latest annual report

2. The company suffered a severe blow (black swan event) when the US decided to outlaw online gambling and this wiped out two thirds of the company's business in a stroke. This has resulted in a terrible chart, some terrible YoY comparison numbers and damaged sentiment. However, if one looks 'under the hood' there are early signs of a far stronger company emerging from the 'ashes'. A more robust company with a multi-territory, multi-currency, multi-ligual offering.

The competive advantage the company has is:
1. Large presence/size, blue chip status.
2. Gold seal operating standards which is now attracting partners like ITV & Paramount.
3. Huge market potentional with relative small extra capital expenditure.
4. Barriers to entry - would be very difficult for a new company to enter the market and steal market share. There is existing competition in the form of 888 - but Party's offering is superior. These big players make it almost impossible for new starts to get off the ground.
5. Governments nervous about online gambling, but struggling to regulate it, will probably go down the licensing route (think National Lottery). The companies most likely to be awarded operating licences will be those like Party which have demonstrated that they are fully compliant, law abiding and responsible.

Party increased EBITDA by 119% in 2007 on existing operations. That is phenominal growth considering the setback the company suffered when it's US market vanished overnight.

This business model should be a cash cow in the future, so the reward for early investors ought to be a very good dividend payment in future years.


Exciting upside potential:

1. A change of government in the US this year could result in the worlds biggest online gambling market opening up again, under license. Moves are already in progress to encourage congress to look at licensed online gambling as a potentially huge tax earner. The figures are very favourable for the government.


Having said all of that, I realise that this type of investment is probably too much of a leap of faith for the cautious investor. However, it fits my criteria perfectly.

1. Defensive.
2. Huge growth potential for low capital outlay,
3. Blue chip.
4. Well managed.
5. Future cash cow. Could easily be making a 20-50% return on my original stake by way of dividends, within five years.
6. Takeover potential.
7. Irrational bearish sentiment.
8. Huge upside cream if US market opens back up (more likely than not IMO).
9. New office started in Singapore in 2007 to tap into lucrative Asian market.

[liarspoker] 26/3/2008 10:40

In all honesty it's not my kind of business GSands.

It would take me a while to properly look at it which I am not prepared to do at this time. I've had a cursory look though and saw a tax credit and reallocations of profit so that kind of stuff tends to keep me on my toes.

It's also denominated in US$ and there is huge debt on a very low ROE.

Of course that is only my point of view and I could be completely wrong as I only had a quick look.

What would you say the competitive advantage of the business is ? and ( in the same line ) what is so different about this business model that it sets itself apart from competitors ?

ie: SFR is dominant in it's market accounting for 1/3 of industry profit, they recently took over its closest competitor and therefore, in conjunction with its JV with Corus, have now even greater buying power ( ie they can buy steel cheaper than its competitors ). Therefore they have a lower cost base even when paying staff much better then its competitors thereby retaining the best staff. As such they can make money where others can't and will gain market share in the current economic climate as smaller competitors go bust.

If you can answer like that regarding PRTY I'll have a look into it. ;O)

[gsands] 26/3/2008 10:14

Liarspoker,

Agreed. I note that your RWA is going great guns. Well done on that. I haven't quite brought myself round to the idea of buying that one yet. For the time being it looks like one which has got away.

One of my holdings which seems to be getting cheaper, but I think represents excellent value for money is PRTY (Party Gaming).

I like this company because it has:

1. A strong brand. Big presence. Could be argued that company has a good competitive moat.
2. Excellent growth on continuing operations ( refers to growth after online gambling was outlawed in the USA. This was PRTY's biggest market and hence profits took a big fall).
3. Low capital cost requirements. I.e. the machine is now built. Company is multi-ligual and multi currency. Call centres, websites etc are largely in place. Just feed in the players.
4. History tells us that people gamble more in times of economic hardship. A good defensive stock.


Let me know what you think.

If the stock market closed tomorrow for 5 years, this is one I would be very happy to hold.

[liarspoker] 26/3/2008 09:59

I like reading those Fool articles. I don't like the fact that they are all like 'sales' letters though trying to get people to sign up.

[gsands] 26/3/2008 09:47

Investment advice from Warren:

[liarspoker] 10/3/2008 23:50

Buffett sells White Mountain Insurance for 2 companies & cash:

[gsands] 09/3/2008 23:27

Liarspoker,

I am still trailing that one. All signs look quite positive, but I am not going to buy it here. I don't like the 'V' bottom on the chart. It is possible that if we have another steep sell-off in stocks (which I am expecting) that a more suitable entry point may present itself.

RWA certainly looks cheap on fundies, but then so do a lot of stocks at the moment.

[liarspoker] 06/3/2008 19:06

What do make of the big trades in RWA GSands ?

[gsands] 06/3/2008 18:12

Stock holding up well:

[gsands] 06/3/2008 18:11

I was just about to post the same!

Would you believe it LOL!

[liarspoker] 06/3/2008 12:16

Buffett richest man in world again:

[gsands] 04/3/2008 09:40

American already in recession:

[liarspoker] 03/3/2008 21:44

Buy & hold:

[liarspoker] 01/3/2008 10:54

Latest Shareholder Letter:

[liarspoker] 26/2/2008 17:04

RWA - a dip might be hard to come by now.

Director buying: