Stock of the Week: Sky City Entertainment Group Ltd

I know some of you might accuse me of favoritism because I have a large position in Sky City Entertainment Group Ltd [SKC.NZX] in the Share Investor Portfolio but go ahead and do your worst. I believe I am being as unbiased as I can be and I will try to argue my case below. I also picked it as a stock of the week in July 2009.

I think this stock is a good buy at current levels and it looks like the market is showing further share price weakness as 2010 progresses but I cant understand why the share price is heading south. The market is sometimes wrong is where I am heading here. Having said that CEO Nigel Morrison has indicated that Australian expansion is on the cards and the company has plans to spend money on expanding their convention centre offering and the company doesn't have a good history under the previous CEO of making these kind of capital spends translate into profits. I think Morrison is a more careful sort of beast when it comes to expansion and the returns expected and made from them.

Its 2010 full year profit was a record one and it looks like its 2011 year is going to top that as well according to Morrison - he is looking for 10% growth. Add the rugby world cup into the mix and 2011 is going to be a great year for the company.

The gross dividend return of 8.41% alone makes the stock a good investment proposition.

The stock has been trading in a tight range of between around $2.80 and $3.05 since May and patient investors will get this stock cheaper if they wait. I am contemplating buying it between $2.70 - $2.80 to use up my dividend pool from 2010.

I believe that the current share price of $2.92 doesn't reflect its good prospects in 2011 and beyond. It is only one of a few stock prices that hasn't significantly improved as many have over the last year, due to perceptions that the economy is doing better and so it is worth looking at.

I also believe the market is discounting the good management of the company for the past two years and it seems it is skeptical that the company can continue to grow profit as it has done under Nigel Morrison.

I think they can.

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Sky City Entertainment Group @ Share Investor

Sky City set to lose National Convention Centre bid
Sky City Entertainment Group: Australian Acquisition on the Cards?
Sky City Entertainment Group Ltd: 2010 Full Year Profit Analysis
Sky City Entertainment Group 2010 Full Year Profit Preview
Chart of the Week: Sky City Entertainment Group Ltd
Share Investor discusses Convention Centre proposal with CEO Nigel Morrison
Share Investor Q & A: Sky City CEO, Nigel Morrison
Sky City Entertainment: CEO Nigel Morrison discusses 2010 HY
Sky City Convention Centre Expansion a Money Loser: Part Two
Sky City Convention Centre Expansion a Money loser
Sky City Entertainment Group Ltd: Download full Company analysis
Sky City 2010 full year profit looking good
Long Term View: Sky City Entertainment Group Ltd
Sky City Entertainment: CEO Nigel Morrison discusses 2010 Half Year
Sky City Entertainment Group 2010 Interim Profit Review
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Stock of the Week: Sky City Entertainment Group
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Sky City Convention Centre @ Share Investor

Share Investor discusses Convention Centre proposal with CEO Nigel Morrison
Sky City Convention Centre Expansion a Money Loser: Part Two
Sky City Convention Centre Expansion a Money loser
SKC Convention Centre power-point slide illustrations & SKC submission to Auckland City Council

Discuss SKC @ Share Investor Forum

Download SKC Company Reports

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