ANALYSIS:THERE'S A story doing the rounds that on the second day of last year's Cheltenham racing festival, one Irish punter was so disgusted with his luck that he decided there was only thing for it - buy Paddy Power shares, writes Barry O'Halloran
He bought into the listed bookmaker at around €18.60 and subsequently sold near its €28.55 peak, making a 50 per cent return on his investment, easily covering his Cheltenham losses.
The kind of results that drove this - possibly mythical - punter to the dark side were not limited to Cheltenham, but featured throughout racing and other sports, such as soccer and golf.
In all of them, contenders most fancied by punters - and therefore those that they backed - were beaten.
Golfer Pádraig Harrington and top-class Irish racehorse Dylan Thomas helped mitigate those results somewhat in the second half of the year. But the overall outcome for Paddy Power was the one with which most punters are familiar - the bookie finished ahead.
This can be seen most dramatically in the results from its betting shop operations, where operating profits more than doubled in 2007 to top €33 million. However, analysts, and going by yesterday's 2.3 per cent share price increase to €21.65, investors, believe that there is more than just luck to the success of Paddy Power.
Merrion analyst Gavin Kelleher, last week recommended the stock as a "buy" at €22, and set a target price of €28 for the company.
Despite some concerns about consumer sentiment and sterling's weakness against the euro, he argued that the underlying drivers of growth for the company are strong.
Yesterday, chief executive Patrick Kennedy addressed some of the worries about consumer sentiment. He said that the average amount staked by customers in individual bets continued to grow in the first two months of the year.Similarly, its winnings are running ahead of expectations.
That's good news ahead of the Cheltenham festival's start next Tuesday. It's a key meeting for the company.
Like all bookies, Paddy Power goes there with liabilities on both Kauto Star and Denman, contenders for its climactic race, the Gold Cup. That's good news for investors as only one horse can win. Mr Kennedy said the company faces a big payout on Irish "talking horse" Forpadythe- plasterer if he wins his race early on in the week.
There are few quicker routes to the poorhouse than backing Irish talking horses at Cheltenham.
Paddy Power shareholders can head to the festival with every confidence that they'll come out on the right side - again.
