Friday, November 30, 2012

Share Investor's 2013 Stock Picks


2012 has been a great year for stocks so forget about what might happen and suspend belief for a nanosecond and take a read at what I have for you.

The stock picking monkey has been very busy this year with a few surprises.

This year the monkey had a hard go at it but managed to get through quite a few interesting picks.

This year I have picked stocks based on nothing except value of the stock based on where I think it will go.

Please keep in mind dear readers that the picks are my own and they reflect my investment philosophy and not necessarily anyone else's.

My picks are primarily based on a long-term view, regardless of the current short to medium term market turmoil and economic uncertainty.

NB: Since I think most of my portfolio consist of the best stocks on the New Zealand market, I found it difficult to pick stocks outside my realm of self interest.


Share Investor's 2013 Stock Picks 

Picks from the NZX

Sky City Entertainment Group Ltd
[SKC.NZX]



Sky City Entertainment has had an exceptional 2012, with a record FY 2012 profit at the hands of an excellent CEO and a number of strategies planned and executed to produce pleasing results for shareholders. The share price of the company has not however tracked its increased fortunes and has been trading in 2012 between $3.25 - to just over $4.00.

The company has invested alot of money in expansion of the business in 2012 with a large number of eateries and bars added across the company's casinos and new gaming areas in the Auckland casino bearing fruit. 2013 looks promising as the company has bid for a national convention centre and look to cement this deal with Govt in the early part of that year, no matter what the lefties say.

It looks to be good value as a result of this low share price relative to its prospects of a full year profit for 2013 of between $140 -150 million.

Buy on weakness if this company has already been in your sights.


Sky City Convention Centre @ Share Investor

VIDEO - Sky City Entertainment Group : Parliamentary Question related to Convention Centre
Sky City to pay for National Convention Centre
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

Sky City Entertainment Group @ Share Investor


Sky City Gaming: Morningstars look at Sky City's gaming
Share Investor's Total Returns: Sky City Entertainment Group Ltd
Sky City Entertainment Group Ltd: Presentation to Macquarie Group
Morningstar Revalues Sky City Entertainment Group
Guest Post - Michele Hewitson Interview: Nigel Morrison
Failed Sky City bid for Christchurch Casino good news for Shareholders
Sky City Entertainment Group Ltd: Christchurch Casino bid falls short of Investment Criteria
Sky City Entertainment Group Ltd: Never mind the width feel the volume
Sky City Annual Meeting & 2011 - 2012 Profit Forecast
Stock of the Week: Sky City Entertainment Group Ltd
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
Sky City to focus on Gaming
Sky City debts levels now more manageable
Insider Trading on Sky City shares
Sky City Profit Upgrade: Always on the Cards
Sky City's Current Cinema "Boom" a Horror Story in Disguise
Stock of the Week: Sky City Entertainment Group
Are Insiders selling Sky City Stock?
Sky City Entertainment 2009 Interim Result Preamble
2008 Sky City profit analysis
Sky City share offer confusing and unfair for smaller shareholders
Sky City Entertainment 2008 Full Year profit results , NZX release, 2008 full year presentation, result briefing webcast, financial statements
Sky City 2008 profit preamble
Sky City outlines a clear future plan
As recession bites Sky City bites back
Sky City Assets: Buy, sell and hold
Why did you buy that stock? [Sky City Entertainment]
Sky City Share Volumes set tongues wagging
Sky City half year exceptional on cost cutting
NZX Press release: Sky City profit to HY end Dec 2007
Sky City Cinemas no Blockbuster

Sky City Entertainment share price drop
New Broom set to sweep
Sky City Management: Blind, deaf and numb
Sky City sale could be off
Opposition to takeover
Premium for control
Sky City receives takeover bid
Sky City Casino Full Year Profit to June 30 2007
Setting the record straight
Sky City CEO resigns
Sky City Casino: Under performing
Sky City Casino 2007 HY Profit(analysis)
Sky City Casino 2007 HY Profit

Discuss SKC @ Share Investor Forum
Download SKC Company Reports




Fletcher Building Ltd

[FBU.NZX]




Fletcher Building Ltd [FBU.NZX] are showing more of a positive tone as the New Zealand economy limps on but Christchurch City shows signs of rebuilding

While the economy is uncertain the outlook for it is probably a little better than it was 4 years ago yet the share price has been given a beating until recently

I still think the outlook for FBU is good but most of the bad news has already been factored into the share price and further falls would be the market overreacting to this delay.

They also had a good result in to June 30 2012, with a promise of a 20% upgrade.

It is returning a near 9% gross dividend at these price levels and this is clearly an attractive income as well as a good capital gain play as the share price recovers with the first notice of a definite rebuild.


FBU @ Share Investor

Share Price Alert: Fletcher Building Ltd 5
Share Price Alert: Fletcher Building Ltd 4
Share Price Alert: Fletcher Building Ltd 3
Share Price Alert: Fletcher Building Ltd 2
Fletcher Building: Crane Takeover Offer Well Timed
Fletcher Building Ltd: 2010 Full Year Profit Analysis
Fletcher Building: All eggs in one basket make for big risk
Long Term View: Fletcher Building Ltd
Hugh Fletcher: Silver spoon no recipe for success
Long VS Short: Fletcher Building Ltd
Fletcher Building's Commercial arm keeps their head above the tunnel
Sweetheart deal for Fletcher Building's Friends
Fletcher House built on hard times
Fletcher Building down tools in the short term
Why did you buy that stock? [Fletcher Building Ltd]
A solid foundation for the future
Fletcher Building raises profit through canny management
Fletcher's got game

Discuss Fletcher Building @ Share Investor Forum - Register free
Download FBU Company Reports



The Warehouse Group
[WHS.NZ]



The Warehouse Group [WHS.NZ] hasn't been featured since 2010 because retail has been tough especially on the WHS. Retail has been tough in New Zealand and globally over the last few years but there are signs that retail in NZ is on the improve.This confidence by management will only be underpinned by tangible results over the all important 2012 Christmas shopping period and any increase on last year will be a sign that improvement could be on the cards for 2013.

This stock is a good long term play and any increase in sales and cashflow will benefit shareholders with increased dividends.

The increase in sales and profit over the quarter have re-rated this stock.

There is the added bonus is that the company is still in play to some extent pending a decision by either Foodstuffs or Woolworths Australia making an official bid for the company.

Accumulate on weakness.


The Warehouse Group @ Share Investor

Share Investor Q & A: Warehouse Group CEO Mark Powell
Share Investor Q & A: Reader questions to Warehouse CEO Mark Powell
Share Price Alert: The Warehouse Group Ltd 2
Woolworths puts The Warehouse back on the shopping block
Share Investor's Total Returns: The Warehouse Group Ltd
The Warehouse Group Ltd: Takeover Speculation Resurfaces

Share Price Alert: The Warehouse Group Ltd
The Warehouse Group: Tips for the new CEO
The Warehouse Group: Should Ian Morrice Go?
Has the Warehouse lost its Mojo?
Stock of the Day: The Warehouse Group Ltd
The Warehouse Group Ltd: Takeover Prospect looking good on paper
VIDEO: Extended Ian Morrice Interview
Share Investor Q & A: Warehouse Group CEO Ian MorriceWarehouse Group Ltd: 2010 Full Year Profit Analysis
Share Investor Q & A: Questions to The Warehouse' Ian Morrice
Long Term View: The Warehouse Group Ltd
Share Investor Short: Warehouse Group yield worth a look
The Warehouse Group: 2010 Interim Profit Review
The Warehouse: Big Brands, Big Opportunities
Warehouse strike opportunity to buy
Long Term Play: The Warehouse Group
Share Investor Short: Warehouse Group yield worth a second look
Woolworths supermarket consolidation an indicator of a move on the Warehouse?
Stock of the Week: The Warehouse Group
Warehouse 2009 interim profit a key economic indicator
When will The Warehouse bidders make their move?
Long vs Short: The Warehouse Group
Warehouse bidders ready to lay money down
The Warehouse set to cut lose "extra" impediment
The Warehouse sale could hinge on "Extra" decision

The case for The Warehouse without a buyer
Foodstuffs take their foot off the gas
Woolworths seek leave to appeal to Supreme Court

Warehouse appeal decision imminent
Warehouse decision a loser for all
Warehouse Court of appeal decision in Commerce Commission's favour
MARKETWATCH: The Warehouse
The Warehouse takeover saga continues
Why did you buy that stock? [The Warehouse]
History of Warehouse takeover players suggest a long winding road
Court of Appeal delays Warehouse bid
The Warehouse set for turbulent 2008
The Warehouse Court of Appeal case lay in "Extras" hands
WHS Court of Appeal case could be dismissed next week
Commerce Commission impacts on the Warehouse bottom line
The Warehouse in play
Outcomes of Commerce Commission decision
The fight for control begins soon

Discuss WHS @ Share Investor Forum - Register free




Fisher & Paykel Healthcare Ltd

[FPH.NZX]



I have included Fisher & Paykel Healthcare in 2013 because I still consider will be one of the big successes of the next 5-10 years and one I included in the 2008, 2009 ,2010 , 2011 and 2012 Share Investor stock picks,.

It is not only a company with good long-term prospects but a company that is another good hedge against the current global turmoil. Despite the grim economic conditions over the last few years it has managed to grow revenue well and maintaining a good profit despite the weak US dollar. Their products will still sell well despite a possible downturn in other business sectors.

Its share price has done nothing over the last 12 months but as I said above economic conditions have failed to dent its prospects and 2013 looks to show more of the same.

With a 2013 half year profit and revenue up strongly on 2012, 2013 looks to be an even better year than 2012 in terms or business operations.

Its share price has been as low as $1.83 this year and I bought 15000 in January of this year at $2.13.


Fisher & Paykel Healthcare @ Share Investor

Share Investor's 2012 Stock Picks
Global Market Sell-Off Stocks: Fisher & Paykel Healthcare
Resmed takes market share from Fisher & Paykel Healthcare
Resmed kicking Fisher & Paykel Heathcares butt?
Share Price Alert: Fisher & Paykel Healthcare Ltd
I'm Buying: Fisher & Paykel Healthcare Ltd
Share Investor's Total Returns: Fisher & Paykel Healthcare Ltd
Share Investor's 2011 Stock Picks
Stock of the Week: Fisher & Paykel Healthcare Ltd
Fisher & Paykel Healthcare & the US Dollar
Mondrian Investment Partners take stake in Fisher & Paykel Healthcare
Fisher & Paykel Healthcare: 2010 Full Year Profit rests on Foreign exchange movement
Long Term View: Fisher & Paykel Healthcare
Stock of the Week: Fisher & Paykel Healthcare
Analysis - Fisher & Paykel Healthcare: FY Profit to 31/03/09
Schroder Investment Management takes big Fisher & Paykel Healthcare stake
Long VS Short: Fisher & Paykel Healthcare
Big Fisher & Paykel Healthcare trades a curious tale
Why did you buy that stock? [Fisher & Paykel Healthcare]

Drinking and Trading
Share Investor's 2008 stock picks
Fisher & Paykel: A tale of two companies
FPH downgrade masks good performance

Discuss FPH @ Share Investor Forum
Download FPH Company Reports



Pumpkin Patch Ltd
[PPL.NZX

 









Pumpkin Patch Ltd [PPL.NZX] had a reversal of sorts this year. From a penny dreadful to above a buck it changed its fortune when it put global dominance behind them and concentrated on this part of the world.

It still is overseas but through different channels such as 3rd parties which the patch gets its fair share of.


They managed a decent profit this half year and all the reorganization has thus far had the required impetus, so much so that there is talk of paying a divided next year.

Look  forward to new stores and some exciting new clothes for the coming season.


Pumpkin Patch @ Share Investor

Share Price Alert: Pumpkin Patch Ltd 4
Share Price Alert: Pumpkin Patch Ltd 3
Share Price Alert: Pumpkin Patch Ltd 2
Share Price Alert: Pumpkin Patch Ltd

Stock of the Week: Pumpkin Patch Ltd
VIDEO INTERVIEW: Pumpkin Patch CFO Matthew Washington
Pumpkin Patch Ltd: 2010 Full Year Profit Analysis
Pumpkin Patch Ltd move downmarket
Long Term View: Pumpkin Patch Ltd
Pumpkin Patch's North American Downsizing a Prudent move
Digging at Pumpkin's Profit
Long vs Short: Pumpkin Patch Ltd
Pumpkin Patch Buyback shows Confidence in the Future
Pumpkin Patch takes a hit
Pumpkin Patch ripe for the picking
What is Jan Cameron up to?
I'm buying

Why did you buy that Stock? [Pumpkin Patch]
Rod Duke's Pumpkin Patch gets bigger
Buyer of large piece of Pumpkin Patch a mystery

Pumpkin Patch a screaming buy
Broker downgrades of PPL lack long term vision
Pumpkin's expansion comes at a cost
Pumpkin Patch vs Burger Fuel
Pumpkin Patch profits flatten
New Zealand Retailers ring up costs not tills

Discuss PPL @ Share Investor Forum
Download PPL Company Reports




Mainfreight Ltd
[MFT.NZ]



 

Mainfreight is a dominant player in the logistics sector in Australasia and has businesses in North America and Asia. It has designs on becoming a global logistics player and is well on the way to acheiving its own stated aim of 2 billion in revenue. It has a stated aim of doubling in size over the next 3-5 years.

It is one of the best managed companies listed on the NZX.

There has been a few hiccups along the way, Win Bosman on sale to MFT, is a black spot thus far but you cannot undermine MFT management of this situation and some patchy performance in Asia.

There is no doubt that MFT will manage its way out of it, they have managed thus far this year and Im picking they will manage their way out this year.

Buy on weakness.



Mainfreight @ Share Investor

Share Investor's 2012 Stock Picks
Share Price Alert: Mainfreight Ltd 3
Share Price Alert: Mainfreight Ltd 2
Mainfreight's European Aquisition a Good Move
Share Price Alert: Mainfreight Ltd
Investing in the Stockmarket: Timing your Purchase
Stock of the Week: Mainfreight Ltd
Mainfreight Ltd: 2011 1st quarter Profit Analysis
VIDEO: Don Braid with Paul Holmes on the Economy
Mainfreight Ltd: Full Year 2010 Profit Analysis
Long Term View: Mainfreight Ltd
Share Investor Interview: Mainfreight's MD Don Braid
Stock of the Week: Mainfreight Ltd
Questions to Mainfreight's MD Don Braid
I'm Buying: Mainfreight Management delivers the goods
Mainfreight Annual Report Packs a Punch
Analysis - Mainfreight Ltd: FY Profit to 31/03/09
Mainfreight VS KiwiRail: The Sequel
Long VS Short: Mainfreight Ltd
Why did you buy that stock? [Mainfreight Ltd]
Mainfreight 2008 Annual report worth reading
KiwiRail will cost Mainfreight
Mainfreight keeps on truckin
A rare breed
Share Investor's 2008 stock picks

Discuss MFT @ Share Investor Forum




New Zealand Refining Ltd

[NZR.NZX]


With low refining rates, massive capital expenditure and plant shutdowns largely behind them and a rising global oil prices, 2013 looks to be a resurgent year for New Zealand Refining Ltd.

Those higher oil prices will see this stock rise and it has already and the oil price rise has been a significant one. It has been mainly due to a very cold Northern Winter bumping up all sorts of petrochemical products so it is unclear just how sustainable the oil price rise will be. Having said that the recent rise is bound to gain some traction even when the Northern ice melts away and 2013 rolls along.

Their mid 2012 profit was horrible but that should be the last of that, it can only go down so far.

Look for an increased dividend in 2013 as profit increases that will underpin a good share price rise from current levels.


NZR @ Share Investor


Contact Energy Ltd
[CEN.NZX]



Contact Energy has had a relatively good 2012 and slightly more customer numbers but 2013 is shaping up to be a better year for the company.

Drought conditions experienced now and forecast to continue across Summer are going to benefit a generator like Contact considerably and this will go straight to the bottom-line. Customer numbers have stopped falling and have showed some small gains over the months.

The are also persistent rumours that majority owner of the company origin Energy Ltd[ORG.NZX] are still interested in taking full control at some stage.

I bought some at $5.34 in July 2011 and I think investors have bailed too early considering things are finally starting to go their way. Look to buy before Winter 2013 because I am picking a good one for the company because of what I have outlined above.

A good defensive stock in times of economic uncertainty as 2013 will no doubt be.


Contact Energy @ Share Investor

Share Investor's 2012 Stock Picks
Share Price Alert: Contact Energy Ltd 5
Contact Energy look set to gain customers
I'm Buying: Contact Energy Ltd
Share Investor Portfolio 2: Value @ 7 July 2011
Share Price Alert: Contact Energy Ltd 4
Share Price Alert: Contact Energy Ltd 3
Share Price Alert: Contact Energy Ltd 2
Share Price Alert: Contact Energy Ltd
Stock of the Week - Reprise 5: Contact Energy Ltd
Origin Energy asset stripping Contact Energy
Stock of the Week - Reprise 4: Contact Energy Ltd
Stock of the Week - Reprise 3: Contact Energy Ltd
Long Term View: Contact Energy Ltd
Stock of the Week: Reprise 2 - Contact Energy
Stock of the Week: Reprise - Contact Energy
Not so fast Davy Boy
Still Watching Contact Energy
Beam me up Davy
Stock of the Week: Contact Energy
MarketWatch: Contact Energy - June 2009
MarketWatch: Contact Energy - Jan 2009
Contact Energy looks bright during dark times
Share Investor's 2009 Stock Picks
Follow the Monopoly Board

Discuss this stock at Share Investor Forum - Register free


Nasdaq

YUM! Brands Inc
[YUM.NASDAQ]

Image

A pick from 2010, 2011 & 2012 Yum ! Brands Inc achieved a billion plus in sales growth for 2012 and with more tasty growth to come in 2013 and beyond from China & India still make this company a Finger Lickin proposition. It will never be cheaper.


ASX

Coca Cola Amatil
[CCL.AX]

Coca Cola Amatil is the dominant player in the carbonated drinks market in Australasia. It sells its iconic Coca Cola brand as well as a large number of other well known brands in New Zealand, Australia, Indonesia, Fiji and a number of other markets in this part of the world. Their latest 2012 result shows a good profit.

A strong history of profits can be a good sign that there is more to come in the future and the fact that its customers are largely addicted to its products makes this company a great long term bet. I have always liked this company because it keeps managing to grow its business with clever marketing and product placement at sales outlets.

Buy on any weakness for superior long-term returns.

Coca Cola @ Share Investor

Coke is it!


Caltex Australia Ltd
[
CTX.AX]


Caltex Australia Ltd is Australia's largest refiner of oil and oil based products and has one of Australia's largest networks of filling stations.

Its share price has done well over 2012 and is likely to do so in 2013 because the company still remains a dominant player in its sector with good long term potential.

The retail sector for petrol in Australia is undergoing consolidation at the moment and Caltex could be set to benefit.

Buy on weakness for good long term gains.


Other notable quotables

NZX

Auckland International Airport [AIA.NZ] A good monopoly at historically cheap prices.

Kathmandu Holdings Ltd [KMD.NZ] A listing that I may have been wrong about, well see. Value below NZ$1.80.

New Zealand Refining [NZR.NZ] The country's only refiner of oil products. The share price should recover on a lower Kiwi dollar and therefore better margins, an increased global demand for oil and refurbished, expanded plant which will be ready soon.

Port of Tauranga [POT.NZ] New Zealand's leading port company with good upside on increased exports.

Michael Hill International [MHI.NZ] A very well managed jewelry chain poised for global expansion just waiting for that all-important US market to come to the party.


Conclusion & Outlook for 2013


2013 may well be a year of some severe downward corrections on global stock markets. As uncertainty surrounds the fragile state of many economies and the precarious state of Europe's debt yoke and more pain and drama to come in the United States as politicians argue over spending cuts to stop the country from defaulting. Gains made on stock markets in 2012 could materialize for some as nervousness over the aforementioned leaves them to take cash off the table. It is clear that there is much more bad news in relation to the global economy to come and the consequences of this bad news one can only guess at but it will not be pretty at all.

That aside if you can, most listed companies have done well in 2012, and will continue to do so in 2013 but others will find the going tough as cash flow dries up, debt mounts and interest rates bite.

I got rid of  PPG, GFF and STU this year cause they irritated the hell out of me and they will never go anywhere. Why did I keep them? Well god only knows its been a year of changes.

Remember, the stocks I have picked above are based on my investment criteria and may not fit yours and of course you could have a different opinion. I would love to hear your opinion and any picks you may have.

Have a look at what I have to say, take it on board or not and then do your own research to see if you might agree with me.

Lastly, I wish you all good luck and a prosperous 2013.


*Just an added footnote. Please feel free to post your own stock picks for 2013. The only requirement is that you say why and declare any financial interest. Post them below at the bottom of this piece or click here.


Disclosure : I own  SKC, FBU, WHS, FPH, MFT, PPL, MHI, AIA, CEN shares in the Share Investor Portfolio.


Share Investor's Annual Stock Picks


Share Investor's 2013 Stock Picks

Share Investor's 2012 Stock Picks
Share Investor's 2011 Stock Picks
Share Investor's 2010 Stock Picks
Share Investor's 2009 Stock Picks
Share Investor's 2008 Stock picks

Broker Picks

Brokers 2012 Stock Picks
Brokers 2011 Stock Picks




c Share Investor 2012, 2013





Wednesday, November 14, 2012

Do you still Love Xero?





From the moment this company listed in 2007 it promised big things. Xero Ltd [XRO.NZ]has thus far failed to turn a profit. It is growing pretty fast but from a smallish base.

Its recent listing in Australia last week has seen its shares hit the stratosphere. Nearly $6.50!

The shares started the year at $2.25 and since then (see chart above) they have continued to rise like a rocket ship. It seems $10.00 would not be out of question given now that the Aussies are having a go at it.

It is clear that there are two different things at play here.

One the success of the company and its growth - which appears to be growing fast - and the price and fluctuation of shares.

One way or the other you are going to have some burnt fingers, when the truth comes out about how profitable they are going to be.

Watch for the share price take a slow trip the other way when this happens, and believe me it will .

Rods interview with me in 2010 , made it clear where the company was heading and more interesting one with a user gave an interesting take on the Xero phenomenon .

You have been warned.



Xero Ltd @ Share Investor

Share Price Alert: Xero Ltd 2
Share Price Alert:Xero Ltd
Xero Ltd: 2011 HY Loss looking promising
From Xero to Hero?
Stock of the Day: Xero Ltd
Rod Drury ready for the long-haul with Xero
Share Investor Interview: Xero's Rod Drury
Xero Ltd: Download full Company Analysis
Rod Drury on Xero and Growing Business
Xero set for surprise to the Market?
Love Xero?
Share Investor's 2010 Stock Picks
Stock of the Week: Xero Ltd

Discuss Xero @ Share Investor Forum
Download Xero Company Report
Listen to Rod Drury Interview




Recommended Amazon Reading




Xero For Dummies (For Dummies (Business & Personal Finance))Xero For Dummies (For Dummies (Business & Personal Finance)) by Heather Smith
Buy new: $26.68 / Used from: $12.37
Usually ships in 24 hours






c Share Investor 2012


Wednesday, October 31, 2012

Steal & Tube

Click on photo for bigger size. Received this in the post yesterday sold my very small holding in Steel & Tube [STU.NZ] last week. Got about double for it. Stunned that there are so many out there that would sell but there it is, just warning you, beware.


Steel & Tube @ Share Investor

Value Play: Steel & Tube Ltd
Long Term View: Steel & Tube Ltd
OneSteel makes cheeky bid for minority shareholders
NZX's Top 10 Dividend Returns

Discuss STU @ Share Investor Forum
Download STU Company Reports




c Share Investor 2012

Tuesday, October 23, 2012

Sky City Gaming: Morningstars look at Sky City's gaming


Sky City Casino and hotel in Auckland. Photo / Doug Sherring
Sky City Casino and hotel in Auckland. Photo / Doug Sherring

This was out a few days ago. Looks like the prospects for the main driver of profit are limited but Sky Cities Australian casinos look to become the main earners. Look for Darwin's earnings getting more significant as the years pass.

Valuation: $4.00

Last updated:

21/10/12

Revenues hold up despite Rugby World cup boost, Darwin shines.


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. 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

At its AGM Sky City (SKC) provided a trading update and profit guidance for fiscal 2013. Not surprisingly, the Auckland casino (accounting for 70% of group EBITDA) posted lower revenues for the period to 17 October the prior year boosted by the Rugby World Cup.

Darwin, international VIP and Hamilton were the real standouts delivering double digit revenue growth
Based on the performance so far and current market conditions, management expects normalized NPAT for fiscal 2013 to be in the “NZD 140 millions”.

Impact

We are sticking with our NPAT forecast of NZD 147 million as we expect profit growth in the second-half to more than offset lower earnings in the first-half. 

We expect Auckland’s earnings to remain flat with a lower first-half offset by a stronger second half. Darwin is likely to achieve 8% growth spurred on by the recently opened resort facility (established in July 2012) and the creation of new gaming facilities in FY12.

In the longer term we see good prospects for Darwin stemming from growth in international VIP players due to the casinos proximity to South East Asian countries. Potentially the international VIP business, which is practically non existent right now, could have a turnover of AUD 2 billion in the next two years. That would translate into AUD 6.5 million in incremental EBITDA or an increase of 30% from currently levels.

At its AGM Sky City (SKC) provided a trading update and profit guidance for fiscal 2013. Not surprisingly, the Auckland casino (accounting for 70% of group EBITDA) posted lower revenues for the period to 17 October the prior year boosted by the Rugby World Cup. However, Darwin, international VIP and Hamilton were the real standouts delivering double digit revenue growth. Based on the performance so far and current market conditions, management expects normalized NPAT for fiscal 2013 to be in the “NZD 140 millions”. We are sticking with our NPAT forecast of NZD 147 million as we expect profit growth in the second-half to more than offset lower earnings in the first-half. Our fair value of NZD 4.00 per share also remains intact.

Normalized group revenue was up 1.5% from 1 July to 17 October 2013 driven by Australian casinos, which make up 24% of group EBITDA. As expected the Adelaide business posted flat revenues year-to-date given challenging economic conditions in South Australia. For the full year we expect Adelaide’s EBITDA to be up modestly backed by a better performance from table games.

Darwin’s revenue surged 12.4% underpinned by the recently opened resort facility (established in July 2012) and the creation of new gaming facilities in FY12. The redevelopment of the new VIP Level 2 gaming area, expected to be completed by March 2013, is likely to further enhance the casino’s appeal. We expect Darwin’s EBITDA to increase by 8% this year. In the longer term we see good prospects for Darwin stemming from growth in international VIP players due to the casinos proximity to South East Asian countries. Potentially the international VIP business, which is practically non existent right now, could have a turnover of AUD 2 billion in the next two years. That would translate into AUD 6.5 million in incremental EBITDA or an increase of 30% from currently levels. We also think the AUD 32 billion Inpex LNG project will be very positive for the local economy and might underpin foot traffic to the casino.

Auckland reported a 4.9% decline in top line growth year-to-date. Revenue was impacted by NZD 5 million from the roll out of the new Bally gaming system. However the overall impact on EBITDA was neutral because a similar amount was deducted from expenses. Hence on a normalized basis revenue was 1.7% lower than the prior period. The previous corresponding period however included a one-off benefit of NZD 7 million from the RWC which, if excluded, results in revenue growth of nearly 3%. Considering the prevailing tough economic environment we think Auckland’s performance was creditable. The international VIP business in particular is going from strength to strength and is becoming one of the major growth drivers for the company. Revenue increased 40% year-to-date reflecting the full impact of new facilities created last year. For full year we expect Auckland’s earnings to remain flat with a lower first-half offset by a stronger second half.

Among the smaller casinos Hamilton’s performance was noteworthy. Revenue increased 14% to NZD 17.6 million driven by increased customer visits. Disposable incomes in the region are being buoyed by a strong economy underpinned by the dairy sector. Given the lack of quality hotels in Hamilton, SKC has decided to build a 4.5 star hotel near the casino with the aim of lifting foot traffic. The project will cost NZD 35 million and will be completed in Q1 FY15.

SKC expects to conclude negotiations on the AUD250 million Adelaide riverbank development by 31 December 2012. Also, it is awaiting the Auditor General’s report regarding the NZD 350 million National Convention Centre development. We have previously argued that these investments, while significant, could materially increase shareholder value in the long term.


Previous close Market cap
$3.990 $0 Million
52 week high/low
$4.080 - $3.250
Sector
Consumer Services

Intrinsic valuation

Moat rating Narrow
Business risk Medium
Pricing risk Medium
Company beta

Sector beta

Year 06/11A 06/12A 06/13E 06/14E
NPAT ($m) 130.6 142.2 146.8 152.8
EPS (c) 22.6 24.7 25.5 26.5
% change 0.1 8.9 3.2 4.1
DPS (c) 16.0 17.0 17.8 18.6
Franking (%) 0.0 0.0 0.0 0.0
Yield (%) 5.0 4.8 1.9 1.9
PER (x) 14.3 14.4 37.7 36.2
Source: Aspect Huntley analyst estimates.

6 month price chart



Sky City Convention Centre @ Share Investor

Sky City Entertainment Group Ltd: Convention Centre may mean significant expansion
VIDEO - Sky City Entertainment Group : Parliamentary Question related to Convention Centre
Sky City to pay for National Convention Centre
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

Sky City Entertainment Group @ Share Investor


Share Investor's Total Returns: Sky City Entertainment Group Ltd
Sky City Entertainment Group Ltd: Presentation to Macquarie Group
Morningstar Revalues Sky City Entertainment Group
Guest Post - Michele Hewitson Interview: Nigel Morrison
Failed Sky City bid for Christchurch Casino good news for Shareholders
Sky City Entertainment Group Ltd: Christchurch Casino bid falls short of Investment Criteria
Sky City Entertainment Group Ltd: Never mind the width feel the volume
Sky City Annual Meeting & 2011 - 2012 Profit Forecast
Stock of the Week: Sky City Entertainment Group Ltd
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
Sky City to focus on Gaming
Sky City debts levels now more manageable
Insider Trading on Sky City shares
Sky City Profit Upgrade: Always on the Cards
Sky City's Current Cinema "Boom" a Horror Story in Disguise
Stock of the Week: Sky City Entertainment Group
Are Insiders selling Sky City Stock?
Sky City Entertainment 2009 Interim Result Preamble
2008 Sky City profit analysis
Sky City share offer confusing and unfair for smaller shareholders
Sky City Entertainment 2008 Full Year profit results , NZX release, 2008 full year presentation, result briefing webcast, financial statements
Sky City 2008 profit preamble
Sky City outlines a clear future plan
As recession bites Sky City bites back
Sky City Assets: Buy, sell and hold
Why did you buy that stock? [Sky City Entertainment]
Sky City Share Volumes set tongues wagging
Sky City half year exceptional on cost cutting
NZX Press release: Sky City profit to HY end Dec 2007
Sky City Cinemas no Blockbuster
Sky City Entertainment share price drop
New Broom set to sweep
Sky City Management: Blind, deaf and numb
Sky City sale could be off
Opposition to takeover
Premium for control
Sky City receives takeover bid
Sky City Casino Full Year Profit to June 30 2007
Setting the record straight
Sky City CEO resigns
Sky City Casino: Under performing
Sky City Casino 2007 HY Profit(analysis)
Sky City Casino 2007 HY Profit


Discuss SKC @ Share Investor Forum
Download SKC Company Reports



Share Investor 2012