Failed Sky City bid for Christchurch Casino good news for Shareholders

The refusal from Skyline Enterprises Ltd [SKYLINE] of a bid for their 50% share in the Christchurch Casino from Sky City Entertainment Group Ltd [SKC.NZX] is good news for Sky City investors.

This is why.

Sky City has a stated criteria that current investments and asset purchases must meet a return that nets 15% or more. Much of their current business overall meets that criteria. The total purchase cost for 100% the Christchurch Casino has been conservatively estimated by me at around NZ$250 million and last years $6.9 million net profit for the 50% of the casino that Sky City owns would extrapolate into a total of $13.8 million or a 5.5% net return.*

This figure would be lower than the cost of financing such a deal.

I am puzzled that the company would make such a move** considering it doesn't meet their investment criteria. I can only assume that owning the Christchurch Casino outright would have enabled to develop and grow the property to perhaps eventually meet that criteria but eventually is not the same as its current return.

Clearly Skyline want more for the casino or just see it as a good investment in the pool of assets that currently makes up its business. Skyline own the business from a much lower entry cost than Sky City so the returns for their share of the casino would be much higher than what Sky City get for theirs, so the cost Sky City would have to pay if they wanted to make a successful bid would have to be way over the reported $100-110 million that they made last week.

A lucky escape thus far.

Footnote

*These figures differ from those that I used in my previous post about this topic. The $6.9 million figure in the previous post I stated was an Editda figure and took my estimates from that. In the 2010 Annual Shareholder Review it states it as Editda but Nigel Morrison tells me it is NPAT.

The shareholding I stated in the previous post was also incorrect. It is 50% and not 54.3% as I stated. The confusion comes in through various different tranches of Christchurch Casino shares purchased at 3 different times, the latest being in October 2010. One purchase included a rather complicated transaction where both Skyline and Sky City bought equal shares from a joint partnership in a hotel.

**I was so curious as to why SKC made this bid that didn't meet their investment criteria that I contacted SKC CEO Nigel Morrison earlier this week and including him putting me straight about my estimated figures based on incomplete data from their 2010 Annual Reports he had this to say in relation to a question to him as to whether the company would up the price for their initial bid.

"I can't comment any further other than to say we are confident that any such investment would realize our stated investment hurdle rate."


Sky City Entertainment Group @ Share Investor

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Sky City Convention Centre @ Share Investor

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Xero Ltd: 2011 HY Loss looking promising

Xero Ltd [XRO.NZX] managed to surprise the market in general today in its 2011 HY profit release, with good numbers, in terms of revenue and customer numbers. The company had 27,000 paying business customers with revenue of $3.7m and a loss of $4.7m - an increase of 24% on the comparable 2009 period.

Xero management say that they expect this loss to be a peak and that they are on track to achieve a net profit for the same period in 2012.

They indicate that business costs have started to decrease as customer numbers increase - indicating economies of scale - and that their cost structure is competitive with their competition and their product offering outstrips that of the incumbents in the sector that Xero operates in.

In short Rod Drury and his board appear very bullish about company prospects now and for the rest of 2011 and of course that profit indication for the first half of 2012 must have current investors rubbing their hands with glee.



The share price has put on over 30% since October 21, pre today's announcement and today is up by 5.5% to trade at $1.92 slightly before close of play on the NZX.


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Whats in a Name? ING changes to OnePath to Escape Dubious Past

Interesting the name change from the old ING financial services company to OnePath Ltd has come under the radar of most:



Australia & New Zealand Banking Group, the country's biggest lender, rose 0.2% to $30.55 after it said it was bringing the old ING New Zealand Ltd unit in-house a year after the Australian parent bank bought the remaining 51% of the trans-Tasman funds manager it didn't own.

OnePath Ltd, the new name for the ING unit, has been rolled into the bank's ANZ Wealth group, centralising the lender's insurance, funds management, private banking and investment arms under one umbrella.

As part of the deal, Helen Troup, who headed up the former ING units will leave the business after two years at the top. ANZ's John Body will take charge of the merged unit from next week.
TVNZ, Nov 9 2010

The name change happened back in August and I was reminded of it again yesterday when I saw their glossy new TV ad.

We must be reminded though that ING/ANZ investors were duped into buying into highly risky funds after being told by their teller at ANZ, their investment advisers or ING directly that they were getting low risk investments, and many investors in funds of the formerly named ING have lost millions as a result of that poor investment advice.

Changing its name from ING to OnePath Ltd doesn't change anything material. The same people - bar a bit of surface shuffling of management - are still there and their financial services training, if they have had any at all, is still sadly wanting. By implication you will get the same sort of poor advice from OnePath that you have been getting from ING.

All the glossy TV advertising and media PR will not hide the fact that 10s of millions of dollars of investor money has been lost and ANZ/ING/OnePath still refuse to admit fault and recompense customers for their incompetence.

Restitution should be made before "moving on" by changing its name and hoping the public is going to forget the past.

Unfortunately I think many will be sucked in, again.

Let this be a reminder.


ING/ANZ scam @ Share Investor

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Allan Hubbard Saga: Going Feral - Part 3, The Final Cut

Well, if you have following the sideshow to the Allan Hubbard Saga as a whole, the collapse of Paul Carruthers, the main supporter of Allan Hubbard, into a heap of his own paranoid delusional bile, we seem to have wrapped up the trilogy with news out this morning that Allan Hubbard has distanced himself from Paul and his support activities:

Paul Carruthers, a traveling salesman and the spokesman for the group Stand By Hubbard, has been outspoken in his defence of Mr Hubbard...

Mr Carruthers has frequently commented online that Mr Hubbard's financial downfall was the result of a government and media conspiracy.
Mr Hubbard has said while Mr Carruthers rings him "occasionally", he was not authorised by him to be his spokesman.
"He does have some odd views.
"He is doing this on his own account. He is not an investor; he is just someone that feels strongly about what has happened."
Mr Carruthers is also one of half a dozen regular commenters on the Leave Allan Hubbard Alone Facebook group.
"I said they rolled Allan to make way for the new Heartland Bank. History will prove me right," Mr Carruthers posted on Facebook on Sunday. Timaru Herald 11/11/10
Yes, he does have some "odd views" and clearly for the object of Paul's desire to come out and distance himself so forthrightly means Mr Carruthers needs to step down from his position and let a more moderate and capable person speak for Hubbard. At least get permission from the man to speak on his behalf.

Allan Hubbard can clearly speak for himself and it is best that the public get his side of the story directly from him rather than filtered though an individual with a conspiracy theory at the centre of his argument.

With that in mind, my offer to interview Allan is an open ended one and his rational supporters who are reading this should contact me at shareinvestornz@gmail.com if they want to put me in contact with the man and or let him know I would love it if he could speak to his supporters directly without the distractions from Mr Carruthers.

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