Newsletter Watch: Elixir Gambling Technologies
With a micro-cap valuation of just $188 million and a “penny stock” price, Elixir Gaming Technologies (AMEX:EGT) is a high-risk company.
In most all cases, I would avoid including a “penny stock” in Newsletter Watch; however, this is an exception due to the solid and long-standing reputation of the advisor behind the selection — Keith Fitz-Gerald.
Fitz-Gerald is the editor of Money Map Reporter and the New China Trader, along with the free Money Morning blog. It was in the New China Trader that I found Elixir Gaming Technologies, a speculative play on Asian gambling.
Fitz-Gerald, long considered among the leaders in the financial newsletter community, lives both in the United States and Japan and travels throughout Asian to uncover intriguing investment opportunities.
Elixir Gaming is a play on the growth of gambling throughout lesser-followed Asian markets. According to Keith, the company sells and installs slot machines in “frontier markets” such as Vietnam, Cambodia and the Philippines. It also sells table-gaming devices such as automatic card-verification machines, computer-based shuffling systems and RFID-gaming chips.
Fitz-Gerald does not minimize the risk in Elixir Gaming; rather, he calls the stock a 10-bagger — meaning the stock could rise 10 times in value — while concurrently warning that the issue could also go to zero.
“As a penny stock, it’s going to be a volatile ride. If you’re not able to stomach the fact that you could lose it all with Elixir Gaming, don’t get anywhere near it, particularly in a market like this one,” Fitz-Gerald says.
Operationally, the company has seen its net profits drop 180.6% as of the quarter ended March 2008, while operating margins tanked 221.76% at the same time, the advisor reported. The return on equity, he adds, is an eye-ball-bending decline of 25.79%.
“Naturally, that’s why the stock is trading lower at a mere $1.33 as we go to press and could drop further … before running sharply higher next year.”
According to his research, the company is set to capitalize on two things:
Under-represented Pacific Rim markets as measured by slot machines per person and wins per machine, which means there is huge upside from growing regional income, and
Nearly 89% of the projected 52.5 million to 61.6 million Chinese outbound tourists in 2008 and 2009 are projected to travel within the Asian region while spending $40 billion-plus in the process, including large chunks of change in casinos and slot machines along the way.
“While many investors are focused on Macau, we prefer Elixir Gaming, which is targeting underexposed areas,” he says.
He admits that we have “a ways to go” before Cambodia, the Philippines or Vietnam will reach the status of its more developed neighbors. Nevertheless, “as much as that’s a risk, it’s the opportunity, too,” he says.
Especially when one considers that regulated gambling activities in Asia are projected to grow at 14% a year from 2005 to 2010 which, he suggests, puts them on track to be the world’s fastest.
“Other reasons we’re willing to take an unlikely punt with Elixir include the fact that the company is providing turnkey gaming casinos to local operators in the region,” Fitz-Gerald says.
He suggests that this not only helps the company secure venues it wouldn’t otherwise have access to, but it provides a “quick, easy solution for local operators hoping to cash in on the flood of Chinese money washing over their shores — literally.”
According to the advisor, Elixir is projecting nearly 5,500 machines in place by year end 2008 with another 1,000 or more coming on line each quarter after that.
A slowing in machine placement poses a risk. However, Fitz-Gerald says, “if there’s one thing we’ve seen time and again after nearly two decades in the region, is that where there are Chinese in any great number, there will be gambling … eventually.”
Again, we emphasize the high risk associated with this selection. He considers the stock a buy under $1.41 only with money “you can afford to lose entirely.”
“If you’ve already got a rock-solid portfolio in place and can afford to take a few speculative pot shots, then this may be a great choice.”
Steven Halpern has just compiled a 35-page report on alternative energy, featuring the favorite solar, wind, nuclear, coal and natural gas stocks from the nation's leading financial newsletter advisors. The report is available for free to all Small Cap Newsletter readers.
In most all cases, I would avoid including a “penny stock” in Newsletter Watch; however, this is an exception due to the solid and long-standing reputation of the advisor behind the selection — Keith Fitz-Gerald.
Fitz-Gerald is the editor of Money Map Reporter and the New China Trader, along with the free Money Morning blog. It was in the New China Trader that I found Elixir Gaming Technologies, a speculative play on Asian gambling.
Fitz-Gerald, long considered among the leaders in the financial newsletter community, lives both in the United States and Japan and travels throughout Asian to uncover intriguing investment opportunities.
Elixir Gaming is a play on the growth of gambling throughout lesser-followed Asian markets. According to Keith, the company sells and installs slot machines in “frontier markets” such as Vietnam, Cambodia and the Philippines. It also sells table-gaming devices such as automatic card-verification machines, computer-based shuffling systems and RFID-gaming chips.
Fitz-Gerald does not minimize the risk in Elixir Gaming; rather, he calls the stock a 10-bagger — meaning the stock could rise 10 times in value — while concurrently warning that the issue could also go to zero.
“As a penny stock, it’s going to be a volatile ride. If you’re not able to stomach the fact that you could lose it all with Elixir Gaming, don’t get anywhere near it, particularly in a market like this one,” Fitz-Gerald says.
Operationally, the company has seen its net profits drop 180.6% as of the quarter ended March 2008, while operating margins tanked 221.76% at the same time, the advisor reported. The return on equity, he adds, is an eye-ball-bending decline of 25.79%.
“Naturally, that’s why the stock is trading lower at a mere $1.33 as we go to press and could drop further … before running sharply higher next year.”
According to his research, the company is set to capitalize on two things:
Under-represented Pacific Rim markets as measured by slot machines per person and wins per machine, which means there is huge upside from growing regional income, and
Nearly 89% of the projected 52.5 million to 61.6 million Chinese outbound tourists in 2008 and 2009 are projected to travel within the Asian region while spending $40 billion-plus in the process, including large chunks of change in casinos and slot machines along the way.
“While many investors are focused on Macau, we prefer Elixir Gaming, which is targeting underexposed areas,” he says.
He admits that we have “a ways to go” before Cambodia, the Philippines or Vietnam will reach the status of its more developed neighbors. Nevertheless, “as much as that’s a risk, it’s the opportunity, too,” he says.
Especially when one considers that regulated gambling activities in Asia are projected to grow at 14% a year from 2005 to 2010 which, he suggests, puts them on track to be the world’s fastest.
“Other reasons we’re willing to take an unlikely punt with Elixir include the fact that the company is providing turnkey gaming casinos to local operators in the region,” Fitz-Gerald says.
He suggests that this not only helps the company secure venues it wouldn’t otherwise have access to, but it provides a “quick, easy solution for local operators hoping to cash in on the flood of Chinese money washing over their shores — literally.”
According to the advisor, Elixir is projecting nearly 5,500 machines in place by year end 2008 with another 1,000 or more coming on line each quarter after that.
A slowing in machine placement poses a risk. However, Fitz-Gerald says, “if there’s one thing we’ve seen time and again after nearly two decades in the region, is that where there are Chinese in any great number, there will be gambling … eventually.”
Again, we emphasize the high risk associated with this selection. He considers the stock a buy under $1.41 only with money “you can afford to lose entirely.”
“If you’ve already got a rock-solid portfolio in place and can afford to take a few speculative pot shots, then this may be a great choice.”
Steven Halpern has just compiled a 35-page report on alternative energy, featuring the favorite solar, wind, nuclear, coal and natural gas stocks from the nation's leading financial newsletter advisors. The report is available for free to all Small Cap Newsletter readers.
About the Author
As a newsletter editor and financial journalist, Steven Halpern has covered the investment newsletter industry for 25 years.
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