SOURCE: Reuters

(London, England) — Shares in online gaming and Italian betting shop operator Leisure & Gaming Plc (LNG.L: Quote, Profile , Research) jumped 22 percent on Thursday after it said trading was ahead of its forecasts and analysts earmarked it as a potential takeover target.

Leisure & Gaming, which saw most of its business wiped out virtually overnight last year when the U.S. government effectively outlawed Internet gambling, said trading from the remaining business, mainly franchised betting shops in Italy, was better than expected.

"Trading in 2007 to 12 March has been strong and ahead of management expectations," it said in a statement.

Shares in the firm, which lost almost 90 percent of their value after the U.S. ban, rose 22 percent to 12-1/2 pence by 1415 GMT. They rose as high as 13p, their highest since early January but still well below last year's peaks above 160p.

Analysts said the firm was set to see growth again now the dust had settled in the aftermath of the U.S. problems, while it was also a takeover candidate partly because of the stock's low multiple against forecast earnings per share.

"Online gambling is growing very strongly and the 2007 P/E of less than five times is well below the peer group and does not reflect the restored balance sheet, good growth prospects or likelihood of M&A activity in the sector," said Edison analyst Jane Anscombe.

Chief Executive Henry Birch told Reuters the firm's Italian presence had attracted interest from bigger players looking to push into Italy after the European Court of Justice ruled the country should open up its gambling sector.

"I think I'd be lying if people hadn't been looking at us but if you look at these companies like Ladbrokes (LAD.L: Quote, Profile , Research) and William Hill (WMH.L: Quote, Profile , Research) throwing a lot of money at the Italian market and you look at us with 1000 shops and a market cap of 7 to 8 million pounds, you have to think there is something kind of wrong."

"From our point of view we don't really want to sell the company before we have realised some more value in it."

Henry said the firm was also looking to Romania, Spain and other emerging markets.

"Our model in is to roll out into other emerging markets. From a regulatory perspective there is pressure from the EU for countries to open up their betting markets ... In Spain we are in talks at the moment."