High stakes
Estonian firm Olympic Entertainment Group (OEG), which owns a network of 115 casinos in Central and Eastern Europe, has debuted on the Warsaw Stock Exchange. It is the sixth foreign firm to join the WSE this year and the second Estonian company on the bourse after Silvano Fashion.
"OEG was the first listed gaming company in the Baltic and the East European region," boasted Armin Karu, president of OEG's managing board, referring to the company's IPO on the OMX Tallinn Stock Exchange in October 2006. The total value of that IPO amounted to E71.8 (zł.271.4) million.
The company did not offer any new shares in Warsaw this year, but traded 151 million current shares. The opening price on the WSE reached zł.22.30.
Andri Avila, a member of the management board, said that OEG chose the WSE because it created the opportunity for a wider range of investors to invest in the company's shares. He also said that the Tallinn Stock Exchange is simply too small to show up on many investors' radars.
"The other reason [for our listing on the WSE] is that the liquidity in Warsaw is much higher than in Tallinn. Being listed in Warsaw is a good basis for a potential share issue in the future," said Avila.
Ante up
Step by step, the company has been increasing its presence in Poland. It began operations in the country in April of this year, when it acquired Casinos Polonia. Now, OEG owns eight venues in four cities across the country, including Poland's largest casino, located in the Hilton Hotel in Warsaw. That acquisition cost the firm E7 (zł.26.5) million.
Marcin Bogucki, chief analyst at IDM SA, said that the company wants the market to get used to its presence in Poland. "They may be waiting for a better moment to issue new shares," he added.
Placing its bets
Avila revealed that OEG's future investment plans will definitely lead the company to raise additional capital. "Some announcements in that respect could be made within the next six to nine months," he said, adding that OEG's investment plans for this year are worth about E100 (zł.378) million.
"Over half of this is dedicated to different acquisitions and the rest will be spent on the development of existing branches," he said. This year the company has already completed four takeovers, at a cost of E38 (zł.143.7) million.
OEG wants to become the largest casino operator in Central Europe in terms of turnover, and to operate in at least 10 countries by 2010.
"We are close to that target already. Apart from the seven countries in which we operate [Belarus, Estonia, Latvia, Lithuania, Poland, Romania and Ukraine], we have set up a subsidiary in Slovakia," said Avila.
According to Karu, the company does not intend to limit itself to the CEE region, but, he said, "First we want to focus here, where the competition is less intense."
The firm's H1 2007 revenues in Poland reached E2.6 (zł.9.8) million. Avila expects the figure will change dramatically in H2 2007. "According to our latest calculations, some 20 percent of all our revenues will be generated in Poland," he said. "Historically, we can say that our growth in all the countries in which we operate has amounted to some 10-15 percent on an annual basis" added Avila.
Profitable game
According to Pricewaterhousecoopers analyst Adam Pawlicki, the value of the global gambling market, which includes casinos, slot machines, online gambling and sports betting, is estimated at $100 (zł.267.9) billion annually.
"In Poland the customers of gambling firms spend some zł.6 billion and win about zł.4 billion per year," said Pawlicki. "Unfortunately, these are only estimates. Due to the lack of appropriate laws, the market in which gambling companies operate is not fully regulated and controlled by the state, and this does not only apply to Poland," he added.
Avila admitted that the situation in Poland is unique because of laws which limit the number of casino licences. "We are dependent on the authorities to grow, but there are still licences available and we will try to be successful in winning the tenders," he said.
Betting on growth
Pawlicki pointed out that traditional casinos located in hotels are becoming less and less popular in Europe. "This results from the lower popularity of casinos both across the EU and in Poland specifically, compared to the US and Asia. Casino-gambling expenditures are being transfered to online gambling, and there is a lack of major investments in new casinos in Europe," said Pawlicki.
But Karu said he is not worried by the trend, since his firm's venues offer a wide range of meetings, conferences, shows and presentations in its venues.
OEG's revenues last year reached E106.7 (zł.403) million and its net profit amounted to E24.8 (zł.93.8) million. In H1 2007, the company generated revenues of X66 (zł.249.5) million, 33-percent higher compared to H1 2006. OEG's operational profit in the first half amounted to E12.5 (zł.47.3) million and net profit stood at E12 (zł.45.4) million. "This year, we expect an operational profit of E38 [zł.143.7] million and revenues of E170 [zł.642.6] million. The latter will be about 70-percent higher compared to last year. This is possible, but at the same time a very challenging task," concluded Avila.
