Spreads are something you find in stock trades, buffet tables, and your grocer's margarine aisle, but now China's GigaMedia (Nasdaq: GIGM) is looking to cash in on spreads in the huge sports-betting market.
The company is teaming up with Victor Chandler International Group to launch Everest Bets, expanding GigaMedia's online gambling empire. GigaMedia is already a force in online poker through Everest Poker as well as other virtual casino offerings.
Investors typically think of companies like NetEase.com (Nasdaq: NTES) and Shanda Interactive (Nasdaq: SNDA) when they hear about online gaming. These companies offer massive multiplayer fantasy games in which hundreds of thousands of players are interacting in the same game at the same time. GigaMedia has some skin in the non-gambling space, with an active roster of Web-tethered casual games such as mahjongg, but it's the actual gambling angle that sets it apart. The company is a closer match to online poker enabler CryptoLogic (Nasdaq: CRYP) and PartyPoker.com parent Partygaming.
Online wagering is taboo domestically, but it's a booming industry in Asia and Europe.
Gambling stocks have been a gamble lately. Casino operators MGM Mirage (NYSE: MGM) and Wynn Resorts (Nasdaq: WYNN) are trading 86% and 67% off their 52-week highs.
GigaMedia hasn't been much of a shareholder treat, either, though investors are eating up this morning's expansion news. The stock opened with 5% higher and was sporting a gain as high as 13% a few minutes into the trading day.
The difference between struggling casino companies and an online player such as GigaMedia is that the latter is still heading in the right direction, fundamentally. Revenue and non-GAAP earnings rose by 16% and 22%, respectively, at GigaMedia in its latest quarter. That isn't too shabby for a stock trading at just seven times next year's projected profitability.
In other words, gambling may be the company's business, but investors aren't taking much of a gamble at these ridiculously low prices.
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