Sky City's Current Cinema "Boom" a Horror Story in Disguise

An interview in Granny NZ Herald yesterday with Jane Hastings, general manager of Sky City Entertainment's [SKC.NZ] cinema division prompted me to have another go at this part of the Sky City asset portfolio.

Long term readers of this blog (two years is a long time in the blog world) and the struggling Share Trader chat site will know that I wouldn't touch a movie chain business with a barge pole the length of a CinemaScope screen.

The Herald and its interviewee seem particularly bullish on the movie business at present. Strong attendances, a growing market share for Sky City Cinemas and good product coming up, like the latest Harry Potter and the Half-Blood Prince (2009) movie all look positive.

Add to this the very large capital expenditures that this division has made expanding the business over the last 5 years have been ameliorated of late because of oversupply and you might think you have a business that is a blockbuster ready to print money.

Balance the good news with this though.

Although cinemas are a good cash business, especially during these cash strapped hard economic times, extra revenue doesn't necessarily make for extra profit. Costs have risen along with higher attendance and there will always be more expense to improve technology and modernise facilities.

Recessions like the ones we are currently experiencing are boom times for the entertainment business and cinemas are no exception but investors in Sky City should be aware that the spike in fortunes for their cinema business are fleeting and in the normal cycles of business, the downs are far more frequent than the ups and more often than not the down times are when many cinema operators put up the going out of business sign.

Sustained acceptable returns for the cinema business are simply not the way this sector functions and history is littered with the carcasses of individuals and corporations who have sunk money into cinema that have gone bankrupt or no longer exist.

Best Sky City management use shareholders capital to repay debt as they did earlier last week.

Sky City Cinemas is no different from the rest and I must reiterate dear reader, for the sake of the shareholder, this part of the group's business must be given a Dirty Harry bullet before it drags the rest of the company down with it.

Disclosure I own SKC shares

Visit Sky City Cinemas

Sky City Entertainment Group @ Share Investor

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Discuss this stock @ Share Investor Forum

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Coming Attractions?: Hollywood, High Tech, and the Future of Entertainment (Stanford Business Books) by Philip Meza
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c Share Investor 2009

POLITICAL POLL: Roy Morgan Poll, 10 July 2009

In a remarkable feat the National Party have managed to increase their big lead over the Labour Party to 54% vs Labour dropping to 31.5%.

I say remarkable as it flies in the face of John Key's continuation of Labour social policies of state intervention and meddling in citizen's lives that has marked Labours last 9 years as a complete failure.

From Roy Morgan 

In early July support for John Key’s Coalition Government is 58.5% (up 1%) comprising National Party 54% (up 2%), Maori Party 3% (up 0.5%), ACT NZ 1% (down 1.5%), and United Future 0.5% (unchanged) according to the Roy Morgan New Zealand Poll conducted June 22 — July 5, 2009.

Support for Opposition parties is 41.5% (down 1%); Labour Party 31.5% (down 1.5%), Greens 8% (up 0.5%), NZ First 1% (unchanged), Progressive Party 0.5% (unchanged) and Others 0.5% (unchanged.

The Roy Morgan Government Confidence Rating is at 140 (down 10.5 points) with 63% (down 6%) of New Zealanders saying New Zealand is ‘heading in the right direction’ compared to 23% (up 4.5%) that say New Zealand is ‘heading in the wrong direction.’

During the same period, the Roy Morgan New Zealand Consumer Confidence Rating is up 2.7 points to 106.1.

 

Gary Morgan says:

“In mid June the ruling National Party-led Coalition (58.5%, up 1%) has increased its strong lead over the Opposition Parties (41.5%, down 1%) the latest Roy Morgan New Zealand Poll shows.

“Despite increased concern about the direction the country is heading and Opposition Leader Phil Goff’s continued questioning of what the National Party Government has done to alleviate the economic problems facing the country — these attacks do not yet appear to be making an impact on support for the Government.

“NZ First Leader Winston Peters has returned to the political stage in recent weeks attacking the Government for considering the repeal of the Foreshore & Seabed Act — which concerns title to New Zealand’s foreshore and beaches. This Morgan Poll shows that Peters is yet to translate his renewed prominence with an increase in support for NZ First (1%, unchanged).”

See Roy Morgan for more detail.

Key is running the economy better than it has been in a generation but the social interference and PC nonsense is going to kick them in the goolies sometime in the future.

I would say this was a lucky poll more than anything else and support will taper as Key's Socialist agenda continues to roll out.

c Political Animal 2009

Whittaker's VS Cadbury TV advert

Further to some commentary about my favourite food on my Share Investor Blog and earlier on here, comes a fantastic TV Ad from Whittakers that takes the piss out of Cadbury chocolate.

There have been supposed "taste tests" between the two products, with Cadbury winning most but sales figures for both companies are what really counts and Whittaker's sales are up and Cadbury's are down(where they deserve to be because their chocolate now tastes like sugar with cocoa power in it.)

There have been complaints laid about the ad (Cadbury being one of them) so cop a look before the purple lot get it removed.

It is a classic and sure beats the twitching eyebrows that Cadbury bring to the table.

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c Political Animal 2009

Share Investor Portfolio: 10 July 2009

The Share Investor Portfolio now contains 17 stocks listed on the NZSX. The bulk of the portfolio started back in 2002 and I have added to the bulk of it by using dividends and some cash.

Since May 22 approx NZ $7000 was added due to 3 capital raisings. (1 2 3) Fletcher Building Ltd [FBU.NZ] has added 114 shares | Freightways Ltd [FRE.NZ] 431 shares | Sky City Entertainment Group [SKC.NZ] 1915 shares.

Since the June 15 update a further $7000 was added with the addition of more shares.

Added 7000 Michael Hill International [MHI.NZ] shares and 2000 Auckland International Airport [AIA.NZ] shares.


The Share Investor Portfolio as at 10 July 2009

• Auckland International Airport [AIA] 5000
  
• ASB Capital NO. 2 Ltd [ASBPB] 10000
• Briscoe Group Ltd [BGR] 3000
• Fletcher Building Ltd [FBU] 1114
• Fisher & Paykel Healthcare Corp Ltd [FPH] 5000
• Freightways Ltd [FRE] 8631
• Goodman Fielder Ltd [GFF] 2000
  
• Halleinstein Glasson Ltd [HLG] 1000
• Kiwi Income Property Trust [KIP] 1000
• Mainfreight Ltd [MFT] 3125
• Michael Hill International Ltd [MHI] 10000
• Postie Plus Ltd [PPG] 2535
  
• Pumpkin Patch Ltd [PPL] 5000
• Ryman Healthcare Ltd [RYM] 5000
• Sky City Entertainment [SKC] 36915
• Steel & Tube Holdings Ltd [STU] 400
• The Warehouse Group Ltd [WHS] 8000

Previous Portfolio Updates

Share Investor Portfolio: June 15 2009
Share Investor Portfolio: May 22 2009

Related Share Investor Reading: Why did you buy that stock?

Why did you buy that stock? [Fletcher Building Ltd]
Why did you buy that stock? [Freightways Ltd]
Why did you buy that stock? [Kiwi Income Property Trust]
Why did you buy that stock? [Hallenstein Glasson]
Why did you buy that stock? [Briscoe Group]
Why did you buy that stock? [Fisher & Paykel Healthcare]
Why did you buy that stock? [Pumpkin Patch Ltd]
Why did you buy that stock? [Ryman Healthcare]
Why did you buy that stock? [Michael Hill International]
Why did you buy that stock? [Mainfreight Ltd]
Why did you buy that stock? [The Warehouse Group]
Why did you buy that stock? [Goodman Fielder]
Why did you buy that stock? [Auckland Airport]
Why did you buy that stock? [Sky City Entertainment]


Discuss this topic @ Share Investor Forum

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c Share Investor 2002-2009