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%.

The curtains finally can come up on Wall Street as we lead through the IPO markets busiest week in two years. This week 8 deals are going through with the expectancy to raise $3.5 billion dollars.  Out of the eight, one of them stands out the most for me and its the Chinese Online Gaming Giants Shanda Interactive.

Shanda Games (GAME)

Shanda’s (SNDA) IPO spin-off of their Gaming Business is poised to debut on Friday. This is in effort to focus on developing a more interactive platform with the goal top capture a larger part of the market share. Interactive online games account for 94% of Shanda’s total revenue and is highly profitable. The new company Shanda Games is the largest developer and operator of multiple online role-playing games. In China these games are massively popular similar to World of Warcraft in America. The reason Shanda has become so successful is they were the pioneer of online gaming in China and tapped into the market early. Plus they are looking to grow further with an expected growth rate of 17% through 2013.  In total Shanda Games holds a large portfolio of games, roughly around 30+ in operation. This makes them three times large than any other competitor. The shear size of the company has allowed them to dominate the market as they currently have a large gamer community of over 10 million paying accounts. This constant growth has resulted in a substantial amount of cash flow that helps them expand. Expansion plans include introducing 24 more titles along with a blockbuster title.

Why they will have a Strong Debut

In China this has been the year of online games. They have been on fire tearing up the markets for total gains of 95%. The most recent Chinese Gaming IPO was Sohu.com’s Changyou (CYOU), which has soared more than 139% since its IPO debut in April. Right now Shanda Games is going to be released at a discount to the keys peers on a P/E basis this should drive strong interest in the deal resulting in a momentum drive come Friday pushing the stock higher. Adding to this fundamental valuations favor the new stock as it has an array of long-term attractive growth prospects. Shares for GAME will be priced Thursday at somewhere between $10.50-$12.50. On Friday the stock will debut, I am going to try and jump in Friday and make a play on it. Looking at a long-term perspective I feel GAME is poised to succeed similar to Changyou as they are entering a Bull Market Industry at a time when the recession and financial failures are disappearing.