Sportingbet, the online gaming giant, once again put in a strong performance for the third quarter to December. Boosted by its acquisition of Paradise Poker, which it paid £169.1m for last October, turnover increased 31.1% to £390.5m and pre-tax profits surged 226.2% to £13.7m. Cash generated from operating activities improved by 211.7% to £18.7m. Sportingbet now has 2.5 million registered users and it managed to reduce costs by 11.8% to 69p for each £1 of standard gross profit, on a like-for-like basis. Chief executive Nigel Payne explained that, as volumes increase, IT, employment, administration and depreciation costs will continue to reduce, but marketing and banking costs are unlikely to decline. The company currently spends 30-35% of its gross winnings on advertising. Payne also commented that the tremendous growth Sportingbet achieved should continue as only 3% of a gaming industry worth $300-400bn (£165-220bn) is attributable to online gaming, so the focus is to capture further market share. Offering a full range of gambling products, from sports-books to casino games, the company wants to expand its presence in South America (through organic growth) and Asia, although this latter market is still cash rather than credit card based - a hindrance for online companies. As Sportingbet is throwing off cash, Payne says more acquisitions will occur but it will continue to be selective. Broker Altium forecasts £56.2m pre-tax profits for the year, rising to £73.2m in 2006. Buy.

Market cap:	£1027.3m
PE Forecast:	20.9
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Sportingbet	AIM	£132.99m	28.00p	-0.50p
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