All Entries Tagged With: "GIGM"

GigaMedia (GIGM): A Strong Online Gaming Play

GigaMedia (GIGM) is a company that is focused on online gaming. They operate two companies one of which is a Gaming Software and Services and the other that is an Online Gaming and Services Business.

Balance Sheet

Financially I think GIGM is very impressive. GIGM has a solid balance sheet with around $100 million in cash while only $14 million in short term holdings. That roughly works out to around $2 per share in cash which is an asset they could use to increase shareholder interest in the future. Adding to this, GIGM has been quite profitable. Their sales have an annual growth of 38% and operating profits increase 67%.

Future Growth

Adding to this, GIGM should become more profitable as they have refocused themselves to be a greater provider to the Chinese Region. With many new deals in place revenues are expected to continue to raise projected 12% rise in 2010. Other plans for future expansion include deals to be a sponsor for the World Series of Poker. This will be a great promotional tool for sustainable visibility. Casinos are also currently expanding with more and more acquiring GIGM’s product to place on the gaming floor. Finally, another plus is the GIGM is in strong relations with EA, which could give them an exclusive license for future hot games. GIGM is a compelling stock as they are rapidly expanding and have commented on the possibility of some M&A activity in the future. 67%.

Market Share – Right now GIGM is a small competitor within the industry yet with a large amount of cash on hand and strategic deals I foresee them greatly expanding their market-share in the future.

Industry Growth – The Online Gaming Industry is one of the most lucrative, fastest growing industries out there.

Regulation - Aiding the expansion as well is rumors that the U.S. government is easing restrictions on online gaming, which would initially create a whole new market for GIGM.

Overall

As of right now, GIGM is trading at around $4.79. Calculating its P/E numbers to other Asia-Based Internet Stocks it makes them undervalued. I think it’s a very lucrative play. I would recommend buying it ASAP and buy it all the way up to $5. As for a valuation, my 12-month target price for GIGM is roughly around $8 a share, which would gross to a total net gain of 67%.