ANALYST SCOTCHES PARTY GAMING RUMOUR (Update)

6 June 2008

Numis Securities expert says talk of a settlement is premature


The rumours of a Party Gaming settlement with the US Department of Justice that swept through the London markets last Friday, boosting Party shares by 20 to 30 percent, were discounted this week by Numis Securities expert Richard Carter, who described the speculation as "premature".

Following a detailed review of the incident, Carter issued a note asserting that despite “extensive channel checks, we believe talk of an imminent settlement is premature and in our view is still several months off”. The note added that a deal with the US authorities remained on course throughout 2008 and the size of the possible financial penalty faced by Party could be between “US$24 million and US$150 million based on profits made in the US”.

This figure is a long way short of the "billion dollar penalty settlement" speculated on by some industry sources earlier this week.

The Numis note opined that the Party Gaming investment thesis is compelling, even if a fine of up to US$150 million was imposed on the online gambling group, which has yet to comment on the rumours.

“We believe that post a Department of Justice settlement, the group valuation would materially rise as a key unknown is removed. In addition, we believe the potential shareholder base for Party would dramatically widen and the group would then tap debt markets and borrow up to 2.5x EBITDA, or $409 million, for acquisitions".

Carter predicted a 2008 pre-tax profit figure of US$143.2 million and US$180.8 million for 2009.

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