Gambling Software Company Rallies
By staff
News of a quarterly dividend sent the shares of gambling software company CryptoLogic Inc. climbing 4.9 per cent in trading on the Toronto Stock Exchange yesterday – a feat bordering on the miraculous for a tech company in today’s climate.

'I don't have a line in my model that says dividend. I've got to add some lines to my spread sheet,' said analyst David Shore of Desjardins Securities in Toronto. 'They have a lot of cash, they have no debt, they have low capex [capital expenditure] requirements . . . so if you don't see opportunities for the cash acquisition-wise, then the return of cash to shareholders is always appreciated.'

The shares rose 67 cents to $14.42 in Toronto yesterday, a 52-week high. The stock has climbed about 140 per cent in value on the TSX since April 1 of this year. On the Nasdaq Stock Market yesterday, the stock was up 52 cents (U.S.) to $10.52 .

CryptoLogic, a maker of Internet gambling software and services, will distribute its first quarterly dividend of 3 cents (U.S.) a share on Nov. 24. With about 12.3 million common shares outstanding, the dividend policy will cost the Toronto company about $1.5-million annually.

Founded in 1995, the company derives the bulk of its business from the British market where it has struck lucrative offshore partnerships with some of the country's largest gambling firms, including the Ritz Club and William Hill PLC. As of June 30, CryptoLogic had about $58-million in cash.

'The company is not really a consumer of cash. They are pushing out lots of cash, which I assume is why they have the confidence to end up saying 'Quick, let's return some of this to shareholders,' ' said Robert McWhirter, a portfolio manager with First Asset Investment Management Inc. of Toronto. First Asset holds some CryptoLogic shares in its $3.5-million (Canadian) Northwest Specialty Innovation fund.

Despite good reviews yesterday, CryptoLogic has a checkered history. A $5.9-million (U.S.) investment in Ltd. proved disastrous when the Web portal filed for receivership last year. In June, 2002, and again in February this year, the company cut its financial targets, citing industry challenges.

While the United States continues to bar on-line gambling, CryptoLogic is focusing growth on regulated markets, and Britain in particular. A listing on the London Stock Exchange is in the works.

Not surprisingly, in a recent interview, president and chief executive officer Lewis Rose said the company is 'still just scratching the surface of on-line gaming.' This year, an estimated $3.5-billion will be gambled via the Internet, compared with about $225-billion at traditional casinos and racetracks.

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