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Sportingbet (LON:SBT) report: Spanish Siesta!

Contributed by Daniel Stewart & Company

By Daniel Stewart & Co

- News out of Spain is that regional authorities are at odds with Spain’s Ministry of Finance regarding online gambling reforms.

- Madrid’s local director of gaming and taxation, demanded a larger role for regional authorities in the process and the recognition of online regulations already in place in some regions in Spain.

- Local observers are writing off a late 2011 launch for Spain's online gambling market as overly optimistic, citing that national authorities need to cooperate with autonomous communities and cannot impose their own conditions. The tax structure is going to be the most important issue in the bill, and some point out that the draft bill was fairly basic and that the most important regulations still needed to be drafted. The part-privatisation of LAE could be another sticking point. LAE already stalled on online gambling reforms in order to buy itself time to catch up to foreign operators in the Spanish market, this could continue to be an issue.

- This comes as a blow to the Spanish federal government hoping to push through a bill by the end of 2010. Some Spanish authorities even suggest that it was optimistic for a licensing regime to be ready by the summer of 2012.

- For SBT the delay is good news from an earnings and cash flow point of view as it not only delays the timing of when it would need to apply for a license in order to operate in Spain and the paying of associated taxes in this regard, but also removes any fear that SBT would take a double hit from the liberalisation of Greek and Spanish markets simultaneously.

- We remain buyers of the stock and continue to see SBT’s strategy of expanding into new markets, developing the breadth of its product offering (in:play and mobile) and consistently achieving superior sports betting margin as adding value for shareholders, which should mitigate to some degree the short term hit to profits and cash from the liberalisation of Greece and Spain. BUY