Full-year results from online gaming firm bwin.party digital entertainment came in below forecasts on Friday morning, but Daniel Stewart & Company has kept its 'buy' rating and 173p target price for the stock.

Revenues, down 2.0% year-on-year at €802m, were 2.0% lower than the broker expected along with earnings per share and the dividend, though the broker admitted that it was at the top of the consensus range with its forecasts. bwin.party said that new gaming taxes in Germany and other regulated markets weighed on its results in 2012.

The firm also gave a gloomy update on current trading with average daily revenue down 7.0% in January and February against the fourth quarter of 2012, however, the broker said that margins are running higher than expected.

The 14% growth in earnings before interest, tax, depreciation and amortisation (EBITDA) that DS & Co were looking for this year "may prove a slight stretch given current trading however there is 10 months left to the new year and we think it would be pre-mature to reduce forecasts at this stage", said analyst Michael Campbell.

Nevertheless, he said that the company is still well placed for the US market opening up to regulation though this may take some time yet.

Campbell said: "In the short term there is risk to German revenues in our view due to regulatory uncertainty. Furthermore, it is not clear what the impact of the German 5.0% sports wager tax will be on the business over the longer term where the business has shifted to focussing on longer odds bets in sports."

The broker said that the stock is trading at 7.5 times 2013 EBITDA "which isn't particularly demanding and a discount to the peer group multiples".

"We recently moved to a buy recommendation given the news out of New Jersey [that it has legalised online gambling] and we are sticking with this recommendation, however we maintain investors should be aware of possible German risk to the business."

Shares were down 6.73% at 141.3p by 11:06 on Friday.

BC

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