[goodguy_1]

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Don't forget that the majority of expenses are directly tied to revenue... if poker revenue dropped 50%, related expenses are also likely to drop almost 50% as well.

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that may be on paper but not reality for must businesses that have seen draconinan drop in revenues there expenses dont fall in line with revenues


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Empire 3rd Qtr Actuals:
Rev = 31.4m (Poker = 23, Casino = 8.4)
Profit = 16.1m

Empire 4th Qtr outlook (Goodguy scenario - 50% drop in poker rev):
Rev = 19.9m (11.5+8.4)
Profit = 9m (using 50% of 75% attributed poker expenses reduction)

My feeling is that 50% reduction is too much, as they continue to add new players to replace old players leaving. I believe empire guided about 10% lower. (if my currency conversion math is right, the consensus analyst estimate for 2006 rev is $140M


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that 2006 consensus you can throw out the window ..it's ancient history unless you know that consensus is postsplit from unbiased sources that cover Empire or you have access to something similar to an institutional real-time version of FirstCall-UK becuase none of the analysts know what the fock is going on right now(FC which costs ~$25K a year here in the states...I finagled my way into getting instituonal access to FC trading for myself before Thomson bought out FirstCall and decide to raise FC from $2K a year to $25K-fockers)

If they did 31.4M total in Q3 for a prorated 05 total revenues ~$125M..(just using numbers off the top of my head-not exact stuff) ...that analyst estimate you just referred to is most definetly an estimate 2006 pre-cataclyism. Empire will not do $140M in revenues in 2006.

I'm not saying total poker revenues will go down 50% quarter-to-quarter but Empire is losing players and revenues right now. In my opinion they will not be able to replace players to prior levels or be able or even maintian current levels-their core business is shrinking right now.

The casino revenues are laughable. Please dont use Q3 05 as a template that will proably go down as their best quarter ever. Yes Q3 was sweet but that is past history. Empire's one or two warnings on upcoming quarter were made just to soften the fall. 10% hahah fock the guidance..you know they are low-balling that.

Surely if 2006 revenues were 140M and net were the expected $70M -I'm just using ballparks here...the stock would have value only trading at 3 times sales and and a forward pe of ~8...but the market is already telling you that the $140M is no where close to a reality. Maybe they slightly improve casino revenues but their core business-poker sees a sharp fall off-maybe not 50% maybe more maybe less.

Either way the anaylsts estimates you are using are wrong and pre-SPLIT the market has already confirmed that.

Assuming the current mkt.cap is around $550M .
Even if they did $100M in reveues in 2006 and net $50M the stock would still be a pretty good value -only trading a 10x forward earnings. The market seems to be saying things may be even worse than that thu. Problem is assuming the stock seems cheap at 10X a 2006 estimate that is down $40M from prior estimates..I really dont see any huge drivers of growth for Empire's main business right now without Party-the whole business is consolidating ..growth is slowing across the board.

It'll be interesting to see how this plays out. I have no current position in PRTY or EOL. I'm thinking about getting long Party here on pullbacks. If Party does flaunt another pr ploy concerning a buy-out it may be a chnace to get in the stock at good levels when the stock sells off. Party should not be over-paying for Empire -it will really hurt PRTY if they overpay for EOL. PRTY seem pretty shrewd thu I dont think thats going to happen. If it was 4 months ago when its stock was at all-time highs post ipo and it was still in good stead with analysts and instituions it could get away it-but in this new tougher environment value is key...consolidation is a bitch.