Share Investor

Monday, November 1, 2010

Sky City Annual Meeting & 2011 - 2012 Profit Forecast

Sky City Entertainment Group Ltd [SKC.NZX] had their 2010 Annual Meeting last Friday and outlined their recent results and where the company is headed in 2011.

The following key points came from this meeting:

SKC held its AGM today and provided a trading update for the first quarter. Underlying revenues grew 3.3% while normalized NPAT grew by a similar margin.

Underlying NPAT excluding the Cinema business lifted 5%. This was a pleasing performance given the economy in NZ and headwinds in Darwin.

The international business revenue was up 85% compared to the first quarter. This was the standout of the first quarter’s performance. A vast majority of this growth occurred in Auckland.

The company is making strategic investments in Auckland, Darwin and Adelaide which will lift capital expenditure.

No guidance was provided but management said it would be disappointed if it did not achieve consensus NPAT of NZ$127.4m for FY11. This represents a modest decrease over the prior period. “GST increase coupled with cautious spending makes it difficult to predict the full year outcome”.

A research report from Aspect Huntly out October 30 contains the following forecast for 2011 and 2012:

We are modestly cutting our FY11 forecast to NZ$129m to bring it closer to consensus forecast. We should see a pick up in second half earnings especially for Darwin as comparisons become easier. However the Auckland performance is a big unknown. Should the economy gain strength we could see SKC deliver NPAT growth in FY11.

A significant boost in earnings is expected during the Rugby World Cup. Auckland earnings is expected to increase by 20-25% in 1H12 compared to 1H10. This growth will be evenly split between gaming and non gaming income. We are introducing our FY12 NPAT forecast of NZ$140m.

Comments by me on the two streams of forecast information from SKC management and Aspect Huntly tend to favour forecasts by management rather than Aspect. Forecasting profit can be a lot like doing the same with the weather but Aspect's point about the impact of the 2011 Rugby World Cup on the 2012 full year profit is a good one. I would add that I see the bulk of the extra revenue coming from a boost from non gaming income rather than gaming at the Auckland Casino and one should not discount revenue boosts from their other New Zealand casinos in Hamilton Christchurch and Queenstown and to a much lesser extend their casinos in Australia in Darwin and Adelaide.

Interesting that the company is also looking at taking full control of the Christchurch Casino which they currently have an approximately half share in and a big spend up in facilities across the bulk of their casino properties including further gaming possibilities across the ditch. This will clearly have implications for significant increased debt levels in 2011 onwards.

I am confident that the company can exceed their own forecast of $127.4m for FY11 based on the latest operating data for the current quarter ended on September 2010 but remain cautious about increased debt levels.

Sky City Annual Meeting Docs & Related Reading

Allan Hubbard Saga: On Forged Signatures and Uncharitable Trusts

I happened to be down at the Diwali festival in Aotea Square with the family last night and popped into the Borders Bookstore to relieve myself and passed the NBR and couldn't resist a glance (I'm too lazy to get around to subscribing and don't understand what one gets if one subscribes to the online version or paper version. Do you get access to either one whatever sub you buy?) and noticed the inevitable Allan Hubbard story.

The NBR have been one of the best investigative noses around when it comes to the Hubbard saga, especially the financial bloodhound Matt Nippert and in a story dated October 22 he picks apart some dodgy signature work (see document below - click to get bigger picture) done by the aforementioned Mr Hubbard.

I actually did an inner double take when I read this part of that story, could this be true?

From the NBR:

A massive transfer of assets by Allan Hubbard to people Mr Hubbard had power of attorney over is being unwound by statutory managers.

The extent of paper-and-asset shuffling is illustrated by Mr Hubbard’s confirmation to the National Business Review that he signed nearly a dozen forms in late May using the name of Ashburton farmer Andrew Morris.

The document above is farmer Andrew Morris’ signature to become a director of Winton Farm. Below is Allan Hubbard signing Companies Office paperwork as Mr Morris, as part of a significant assets transfer in May 2010

“I just signed using power of attorney,” Mr Hubbard said.

A senior lawyer experienced in using powers of attorney said the “invariable practice” for signing forms using such powers was to append “as attorney acting for” when signing.

The lawyer said Mr Hubbard signing the name “A J Morris” instead of his own was “unusual to say the least – to sign someone else’s name is unheard of.”

Mr Hubbard explained away the irregularities as an oversight. “I thought the lawyers would have done that. There was no ulterior motive.” NBR, October 2010

So hang on a sec, as an individual with power of attorney Hubbard signed someone elses name on Companies Office documents instead of his own on behalf to transfer millions of dollars of his assets to the person he was signing on behalf of?

Yes Darren he did!! (my inner monologue after butter chicken and Coke at Diwali just next door which was banging my head with a big bass Indian beat, but not as rhythmic as my heartbeat after reading the NBR)

Had Hubbard gone mad at this stage? How could he possibly think even he could get away with this sort of nonsense - some would call it fraud, but no not me - it is breathtakingly blatant in its apparently naive execution. Mr Hubbard has countered that his actions were, "always honourable".

I am clearing my throat at this stage as I have something caught in it and it isn't butter chicken.

To get serious for a moment, this has got to be just one of the many transactions made by Hubbard that the Serious Fraud Office is investigating Hubbard and his fellow directors over.

This clearly contravenes the laws covering powers of attorney in relation to the companies office and having the documents at hand and an admission by Hubbard that he signed them makes this a cut and dried case in a court of law.

Makes the light show at the Diwali festival look dull by comparison.

Pass the butter chicken over here, there is more to come.

October 2010 Top Stock: Michael Hill International Ltd

Michael Hill International Ltd [MHI.NZX] has been a standout performer over October.

It put on 20% over the month on news that Kim Kardashian is going to be spokesperson for a competition being held to promote MHI in the USA and news that the company had a good sales quarter to 30 September 2010.

The 81c per share MHI is trading at is a 2 year high so takes us back to pre-2008 global crash prices. It is well short of the $1.20 (post a 1:10 share split at approx $12 per share) it was trading at in December 2007 however. This share price was inflated due to the anticipation of that share split and pre problems in Canada and the USA and the overall market exuberance at the time.

The last quarter sales figures are extremely good but that must be tempered with the fact that the most important trading period for the company is the quarter that ends December 31 2010.

Like most retailers MHI make the bulk of their profit at Christmas and we all know that people are just not buying - apart from the last quarter at MHI - and the company needs to exceed 2009 half sales by some margin to justify the large increase in share price.

If it doesn't there will be another opportunity to buy this stock at post Christmas sales in January 2011.

Disc I own MHI shares in the Share Investor Portfolio

Michael Hill International @ Share Investor

Share Investor Portfolio: Value @ 1 November 2010

The Share Investor Portfolio is up for the third consecutive week. It is up 1.62% or $4537.50 from the last update, mainly due to a 12c rise in SKC during Friday trading on the NZX.

There is $15660.03 in unspent net dividends in the bank from the 2010 earnings year and approx $50000.00 in tax credits earned from the portfolio since it began in late 2002.

Share Investor Portfolio @ 17:30:00, Friday 29 October, 2010 (NZDT)

Stock

Quantity

Cost price

Total cost

Market price

Market value

Change

AIA

2,000

$1.700

$3,400.00

$2.100

$4,200.00

$800.00

23.53%

AIA

2,000

$1.510

$3,020.00

$2.100

$4,200.00

$1,180.00

39.07%

AIA

803

$2.150

$1,726.45

$2.100

$1,686.30

$40.15

2.33%

AIA

445

$0.000

$0.00

$2.100

$934.50

AIA

$1.650

$105.60

$2.100

$134.40

$28.80

27.27%

ASBPB

2,864

$0.000

$0.00

$0.715

$2,047.76

ASBPB

7,146

$1.000

$7,146.00

$0.715

$5,109.39

$2,036.61

28.50%

BGR

438

$0.000

$0.00

$1.310

$573.78

BGR

2,562

$0.990

$2,536.38

$1.310

$3,356.22

$819.84

32.32%

FBU

266

$0.000

$0.00

$8.210

$2,183.86

FBU

848

$9.750

$8,268.00

$8.210

$6,962.08

$1,305.92

15.79%

FPH

3,000

$2.350

$7,050.00

$3.240

$9,720.00

$2,670.00

37.87%

FPH

469

$0.000

$0.00

$3.240

$1,519.56

FPH

1,531

$3.720

$5,695.32

$3.240

$4,960.44

$734.88

12.90%

FRE

1,882

$0.000

$0.00

$3.040

$5,721.28

FRE

6,749

$3.630

$24,498.87

$3.040

$20,516.96

$3,981.91

16.25%

GFF

541

$0.000

$0.00

$1.940

$1,049.54

GFF

1,459

$2.330

$3,399.47

$1.940

$2,830.46

$569.01

16.74%

HLG

244

$0.000

$0.00

$4.500

$1,098.00

HLG

756

$2.530

$1,912.68

$4.500

$3,402.00

$1,489.32

77.87%

KIP

190

$0.000

$0.00

$1.050

$199.50

KIP

810

$1.480

$1,198.80

$1.050

$850.50

$348.30

29.05%

MFT

1,000

$7.960

$7,960.00

$7.200

$7,200.00

$760.00

9.55%

MFT

1,838

$8.000

$14,704.00

$7.200

$13,233.60

$1,470.40

10.00%

MFT

550

$0.000

$0.00

$7.200

$3,960.00

MFT

1,612

$4.200

$6,770.40

$7.200

$11,606.40

$4,836.00

71.43%

MHI

1,646

$0.860

$1,415.56

$0.810

$1,333.26

$82.30

5.81%

MHI

7,000

$0.630

$4,410.00

$0.810

$5,670.00

$1,260.00

28.57%

MHI

718

$0.000

$0.00

$0.810

$581.58

MHI

636

$1.050

$667.80

$0.810

$515.16

$152.64

22.86%

PPG

$0.000

$0.00

$0.290

$8.99

PPG

1,500

$0.440

$660.00

$0.290

$435.00

$225.00

34.09%

PPG

1,004

$0.800

$803.20

$0.290

$291.16

$512.04

63.75%

PPL

1,000

$3.090

$3,090.00

$1.950

$1,950.00

$1,140.00

36.89%

PPL

1,000

$2.870

$2,870.00

$1.950

$1,950.00

$920.00

32.06%

PPL

939

$4.200

$3,943.80

$1.950

$1,831.05

$2,112.75

53.57%

PPL

877

$0.000

$0.00

$1.950

$1,710.15

PPL

1,184

$1.530

$1,811.52

$1.950

$2,308.80

$497.28

27.45%

RYM

373

$0.000

$0.00

$2.160

$805.68

RYM

4,627

$1.970

$9,115.19

$2.160

$9,994.32

$879.13

9.64%

SKC

5,750

$7.430

$42,722.50

$3.020

$17,365.00

$25,357.50

59.35%

SKC

1,000

$7.600

$7,600.00

$3.020

$3,020.00

$4,580.00

60.26%

SKC

2,750

$7.700

$21,175.00

$3.020

$8,305.00

$12,870.00

60.78%

SKC

1,431

$8.750

$12,521.25

$3.020

$4,321.62

$8,199.63

65.49%

SKC

25,085

$0.000

$0.00

$3.020

$75,756.70

SKC

899

$4.720

$4,243.28

$3.020

$2,714.98

$1,528.30

36.02%

STU

$0.000

$0.00

$2.440

$190.32

STU

322

$4.740

$1,526.28

$2.440

$785.68

$740.60

48.52%

WHS

4,500

$3.730

$16,785.00

$3.990

$17,955.00

$1,170.00

6.97%

WHS

6,979

$6.000

$41,874.00

$3.990

$27,846.21

$14,027.79

33.50%

WHS

2,880

$0.000

$0.00

$3.990

$11,491.20

WHS

641

$3.710

$2,378.11

$3.990

$2,557.59

$179.48

7.55%

15.03%

	Total cost	Market value	Change
	$279,004.46	$320,950.98	$41,946.52

Share Investor

Monday, November 1, 2010

Sky City Annual Meeting & 2011 - 2012 Profit Forecast

Allan Hubbard Saga: On Forged Signatures and Uncharitable Trusts

October 2010 Top Stock: Michael Hill International Ltd

Share Investor Portfolio: Value @ 1 November 2010

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