Share Investor: Sky City Entertainment Group

Showing posts with label Sky City Entertainment Group. Show all posts

Friday, February 3, 2012

Sky City Entertainment Group Ltd: Convention Centre may mean significant gaming expansion

Artists impression of the Sky City National Convention Centre

Steve Jobs Biography - By Walter Isaacson

c Share Investor 2012

Tuesday, August 9, 2011

Global Market Sell-Off Stocks: Sky City Entertainment Group Ltd

Quite frankly, and as I pointed out on Friday, the whole NZX is on sale and while people are losing money people like me are contemplating buying rather than selling. On fundamentals alone there are many NZX stocks that are looking way more attractive than they had been just 3 trading days ago.

Lets look at some specific stocks though and in the first of a new series to coincide with the current stockmarket sales we will look at the biggest part of the Share Investor Portfolio, Sky City Entertainment Group Ltd [SKC.NZX]

The company has a consensus forecast of slightly below $128 million for full year 2011 which is out to the market on Tuesday 16 August. This is around the same as full year 201 0. The 2012 full year is likely to be a record year though. This is primarily due to the Rugby World Cup, which will make its impact felt in the first half of 2012 and the capital expenditure on the Auckland Casino, which has seen more than a dozen new eateries bars and new gaming areas opened or about to open in time for RWC punters. There is of course no guarantee that these new capital expenditures will keep paying for themselves after RWC customers dwindle but there will be a big positive impact on the bottomline at the very least in the first half of 2012.

During the big sell-off over the last 3 trading days the fundamentals for this stock are of course looking much better.

Lets have a look:

P/E	19.880
EPS	$0.169
NTA	$0.630
Gross Div Yield	7.334%

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c Share Investor 2011

Thursday, May 19, 2011

Larger Incentives for Sky City CEO Make Sense

Friday, May 6, 2011

Sky City Entertainment Group Ltd: Presentation to Macquarie Australia Conference

Sky City Entertainment Group Ltd [SKC.NZX] shareholders and prospective investors might want to check out the presentation done by management to the Macquarie Australia Conference on 6 May 2011.

There has been alot of broker interest and spruiking of the company over the last week with a new broker report out this week and a number of stories about the Christchurch Casino and the possible full sale of that to SKC.

Monday, May 2, 2011

Morningstar Revalues Sky City Entertainment Group

The latest research report out by MorningStar on Sky City Entertainment Group Ltd [SKC.NZX] has put a valuation of $3.80 on the stock. I am not sure how they came to pick that figure - it seems quite arbitrary - but it has been known to the market in general that 2012 will be a record year for the company in terms of revenue and profit from the 2011 Rugby World Cup that kicks off in October and has its impact on results in the February 2012 reporting.
announcement.

Disc I own SKC shares in the Share Investor Portfolio

The Morningstar report on SKC

Valuation: $3.80

Appropriately priced, neither buy nor sell

Last updated:

02/05/11

Investment rating

SKC offers gaming services at its casinos in NZ and Australia. The entertainment complex in Auckland is the major driver of earnings accounting for 60% of its operating profit. SKC faces little competition due to NZ government's blanket ban on new casino licenses. This has allowed the company to operate at very healthy profit margins and generate abundant cash flows. An unfavorable economic environment in NZ will constrain growth but earnings will pick up next year following the Rugby World Cup in 2011. Judicious investments are being considered to lift growth in the longer term.

Event

SKC is currently spending NZ$40m on improving the gaming floor layout ahead of the Rugby World Cup (RWC).

The motive behind this spending is to capitalize on the likely rise in tourist traffic during and in the wake of the RWC.

In the long term, management sees huge growth opportunities for its International VIP business from Asian visitors coming to Auckland. The total size of the market in Australasia is estimated to be around A$50bn

The company is currently in discussions with the South Australian government to expand the property to create a much larger gaming-based integrated entertainment complex.

Impact

There will be a one-off spike in earnings next year on the back of the RWC. Management expects EBITDA to grow by 20-25% in the first half of next financial year, driven by 30% growth in non-gaming businesses like food & beverages and hotels.

Our FY12 NPAT of NZ$155m represents a growth of 20% compared to FY10.

Capital expenditure is likely to be around NZ$125m this year, consisting of growth capital expenditure of NZ$65m. We estimate next year’s capex to be between NZ$125-145m. We don’t see any refinancing risk.

Recommendation impact (last updated: 02/05/2011)

Our fair value of NZ$3.80 is based on 15x normalized earnings of NZ25cps.

Event analysis

Auckland: Capitalising on the RWC opportunity

SKC is currently spending NZ$40m on improving the gaming floor layout ahead of the Rugby World Cup (RWC). This investment also includes redoing the federal street precinct by adding more restaurants and bars. The motive behind this spending is to capitalize on the likely rise in tourist traffic during and in the wake of the RWC.

The refurbishment involves extending the Pacific Room, renovating the Platinum Room and creating a Diamond Room by relocating the Fortuna Restaurant on level 2. The Platinum Room will have 270 machines and the Diamond facility will house 250 machines. The new and improved facilities are expected to grow revenues for the Platinum as well as Diamond tiers.

In the long term, management sees huge growth opportunities for its International VIP business from Asian visitors coming to Auckland. There is only one VIP salon at the moment. SKC wants to grow this to four salons over the next few months. Management is confident that with the right product, higher gaming capacity and improved service it will be able to gain market share from some of its competitors across the Tasman. The total size of the market in Australasia is estimated to be around A$50bn. In the first half of the current fiscal year, International VIP turnover nearly doubled over the prior period. We expect revenues to reach NZ$2.8bn this year, which compares to NZ$1.8bn in FY10. Management’s goal is to lift turnover to NZ$4bn over the next 12-18 months.

National Convention Centre: Will SKC end up funding it?

The government wants to build a National Convention Centre in Auckland and SKC is keen to participate in the venture. The idea is to have the convention centre next to the hotel and casino, connected by an over bridge. SKC envisages a significant increase in foot traffic to its casino and hotel properties. However, the funding model is still up in the air. The government could fund the project but given its fragile balance sheet, especially after the Christchurch earthquake, it might choose to tap private capital instead. The total cost of the project is estimated to be around NZ$300m. SKC sees a great opportunity but it is unclear whether it can make adequate returns under the current regulatory regime. Time will tell whether SKC and the government can thrash out a deal. We will keep a close eye on developments.

Adelaide: Good potential but constrained by regulatory framework

Adelaide is hamstrung by a very restrictive regulatory regime, high tax rates and a lack of parking and entertainment facilities in and around the casino. Consequently, the casino has largely underperformed its other Australasian peers in terms of visitors, revenues and EBITDA margin. The casino currently generates around A$30bn in EBITDA every year, but has the potential to generate A$80bn in EBITDA with a more friendly regulatory framework that its peers enjoy.

The company is currently in discussions with the South Australian government to expand the property to create a much larger gaming-based integrated entertainment complex. It wants to do this alongside the government’s proposed Riverbank Masterplan development. The plan envisages a significant increase in car parks, a material increase in machines and tables, construction of a hotel, and a range of restaurants and bars. The cost of the project is estimated to be approximately A$250m. SKC says it will commit to the project only if it is able to reach an agreement with the government and is able to earn an adequate return on capital.

Rugby World Cup: a one-off bonanza

The Intelligent Investor: The Definitive Book on Value Investing. A Book of Practical Counsel (Revised Edition) by Benjamin Graham
Buy new: $14.95 / Used from: $6.99
Usually ships in 24 hours

c Share Investor 2011

Tuesday, March 15, 2011

Auckland Council in conflict of interest furore over Casino Development

Share Investor

Friday, February 3, 2012

Sky City Entertainment Group Ltd: Convention Centre may mean significant gaming expansion

Tuesday, August 9, 2011

Global Market Sell-Off Stocks: Sky City Entertainment Group Ltd

Thursday, May 19, 2011

Larger Incentives for Sky City CEO Make Sense

Friday, May 6, 2011

Sky City Entertainment Group Ltd: Presentation to Macquarie Australia Conference

Monday, May 2, 2011

Morningstar Revalues Sky City Entertainment Group

Investment rating

Event

Impact

Recommendation impact (last updated: 02/05/2011)

Event analysis

Tuesday, March 15, 2011

Auckland Council in conflict of interest furore over Casino Development

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