eBet jumps to nine-year high

eBet (EBT) is retesting its nine-year high after management issued a better-than-expected profit and dividend guidance for the current financial year.

The gaming technology solutions provider jumped 2.8% to $3.70 – a high last reached in May this year. The stock has not finished above this level since 2005.

Management said today that pre-tax profit will come in between $3.5 million to $3.7 million for the year ending June 30, 2014, and shareholders can expect a 5.5 cents a share dividend for the year, which is a 57% increase over the previous year.

Further, management is also planning to declare a five-to-six cent a share capital return at this year’s annual general meeting.

The profit and dividend are ahead of what I had been anticipating. I was forecasting a pre-tax figure of $3.1 million and a 5.03 cent a share payout for 2013-14.

The strong result is largely driven by a strong take-up of eBet’s CARD IT product – a stored value card that can be used on pokies machines. Costs are also expected to lag revenue growth as eBet’s new agreement with WMS will see the latter take responsibility for costs associated with selling the WMS machines.

If I put through the latest guidance, my price target will jump materially. However, given that the share price is still comfortably below my valuation, I will wait for eBet to release its full year results on August 19 before making any changes.