CryptoLogic Limited (USA) (CRYP)

blitzen94 (< 20) Submitted: 10/05/06 3:45 PM : Start Price: $16.26 CRYP Score: -48.64

There may be some more pain as 2006 winds down and make no mistake...US legislation is a legitimate threat. But it's a threat to the short-term cash flow strength, NOT a threat the viability of the company or its ability to generate cash elsewhere.

As I write this the latest figures show an EV of a mere $106M (231Mkt Cap - 125 Cash+STI). 2005's owner earnings of $15M give an EV/OE of 7x whereas we now have two quarters in the books in 2006 and owner earnings already stand at $16M. Even with money going to the move across the pond off-setting what may be decreasing earnings into Q4 I can't see an EV/OE of more than 5x for this year.

Add to this a dividend and my only complaint is marginal management. I don't think they're crooks or even greedy but their decisions and actions are not those of an upper eschelon team either.

CRYP may be a risky pick but the reward is definitely there. Consider it like splitting Aces when the dealer is showing 9. You know you HAVE to do it but there may be pain ahead as well.

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