Questions for Sky City Entertainment Group CEO Nigel Morrison

Read the Interview

After being emailed yesterday by Nigel Morrison, CEO of Sky City Entertainment Group [SKC.NZ] over a piece that I wrote last week about Bruce Sheppard's take on the company's debt levels, he ended the email asking if there is anything he could do to help out.

I sent back an email thanking him, then it occurred to me that there was something I wanted from him.

An interview!

So I emailed him back asking if he would answer some questions from myself, other Sky City shareholders and other readers of this blog and he kindly answered in the affirmative.

So, now is the chance dear readers to put some questions to Nigel.

You can submit them at the Share Investor Forum here or email them to me here and I will submit the best ones to Nigel.

The interview will come out after the company Full Year result that is now coming out early, on Wednesday 19 Aug instead of the following week. It will be published here sometime in early September as I will be away for a couple of weeks in Bangkok soon, so it will take some time to put together.

Read the Interview

Disclosure: I own SKC shares in the Share Investor Portfolio

Sky City Entertainment Group @ Share Investor

• 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
• Sky City share offer confusing and unfair for smaller shareholders
• Sky City CEO doubles down
• Sky City Entertainment 2009 Interim Profit Review
• Sky City Entertainment 2009 Interim Result Preamble
• 2008 Sky City profit analysis
• 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
  

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A Closer look: Domino's Pizza Enterprises Ltd

I have always been a big fan of fast food, as a consumer and as an investor.

I used to have a stake in Restaurant Brands Ltd [RBD.NZX], the New Zealand franchisee of Pizza Hut, KFC and Starbucks.

As business these sorts of companies are excellent ones to own, if they are well managed, cost and service levels kept on top of and food quality maintained.

If none of these things are adhered to they can be a license to go out of business. RBD has struggled for years with the operation of its Pizza Hut franchisee, finally relenting and selling the business to owner operators.

Domino's Pizza Enterprises Ltd [DMP.ASX] is the Australian listed pizza chain franchisee that runs over 750 Domino's pizza outlets in Australia, New Zealand, France, Belgium, The Netherlands and the Principality of Monaco of all places and like most other fast food chains is currently doing well, with a huge rise of profit forecast that is to be announced 19 August because of the switch from going out to eat to punching the keypad and settling down on the couch with a pizza and Coke.

Company Profile | Success Factors | Corporate Governance

Webcast Q2 2009 Domino's Inc.[DPZ.NYSE] Earnings Conference Call (Replay) 07/22/09 at 11:00 a.m. ET

To be fair Domino's has been growing outlets, sales and profit for a few years before the current boom and it is a very well operated business, with a focus on the bottomline and customer satisfaction the two main keys to its success and it has ambitious plans to keep growing. It has grown quickly by purchases of other pizza brands, adding sub-franchisees and good old-fashioned organic growth through efficiencies and great marketing.

But beware the fast food business or any food business for that matter can be a fickle one. Pizza, more than any other slice of this market seems to have very big swings in business cycles from boom to bust and they operate on wafer thin margins and high throughput, with constant competition from mum and dad pizza stores to the other large and smaller chains.

Domino's does have an edge though. It specializes in one thing and does it well and its owner operators are the secret to the Australian Franchisor success (Domino's OZ is itself a Franchisee of big daddy Domino's Inc [DPZ.NYSE] in the USA but in turn has franchisees that own and operate individual stores that provide a percentage of their store turnover which is Domino's OZ main form of income-apart from sales from its company owned stores ) driving the Domino's brand, literally, to become the worlds largest Pizza Delivery and sales company.

Domino's Australia seems to be near the top of their current growth phase but having said that there will be more boom times to come and lets hope their good management gets them through the troughs to come.

The ASX listed stock seems fully priced at current levels and is worth adding to your portfolio during its down cycles.

Domino's @ Share Investor

Domino's Australia dominant in Australasia
The Dots get the Hots

Discuss Domino's Pizza Enterprises @ Share Investor Forum

Related Links

Domino's Pizza Enterprises - Corporate Website | Investor Relations


DMP 2008 Annual Report - 10MB PDF

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Stock of the Week: Methven Ltd

This edition of Stock of the Week focuses on little known company (unless of course if you are already a shareholder) Methven Ltd [MVN.NZ].

Methven is an up and coming star in the bathroom products/kitchenware area as far as delivering water to the consumer via their various faucet related products (it has been around for for 125 years) and it has recently had an overriding push to market high end to higher quality mass market products, rather than high volume lower quality mass market garbage from China or elsewhere and that is the main reason why I chose this stock.

Management are clearly on the ball too with their emphasis on the quality end of the mass market where higher margins are made, with a good niche to carve out, especially for a smaller Kiwi player that simply cannot compete on scale.

They haven't done spectacularly well over the last 12 months because of the building downturn, but with aspirations to become a global brand and the willingness to apply money to research new and innovative products, as well as pursuing growth by careful acquisitions Methven should be able to achieve their goals.

Growth will return once we start building again and in the meantime the company is focused on trimming unnecessary costs, to alleviate the temporary dip in profit.

As you can see from the chart above the share price has plumbed the depths to around 65c 4-5 months ago but that is off a 52 week high of NZ$1.74 and an all-time high of $2.80 near the end of 2008.

The dividend yield of just over 12% gross is also a very attractive feature of this stock and apparently will still look quite handsome even with the small profit drop.

Buy on weakness, there should be some stock price drops as the year plods on with the lower profit forecast.

Good luck!


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Methven Ltd @ Share Investor

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c Share Investor 2009

Sky City debts levels now more manageable

Sky City Entertainment Group [SKC.NZ] has been named by Bruce Sheppard as one of his list of NZX companies with debt worries.

Now that time has passed since Bruce debt analysis, on June 30 2008 figures, lets take a look and see whether his criticism about high debt levels is now warranted.

Lets look at company debt levels from the last 5 years:

FIVE YEAR SUMMARY
Consolidated Balance Sheets
As at 30 June				2008	2007	2006	2005	2004
				$000	$000	$000	$000	$000

LIABILITIES
Current liabilities
Payables				121,668	119,501	100,776	97,005	93,619
Interest-bearing liabilities				-	-	-	100,758	101,000
Derivative financial instruments				-	-	25	-	-
Total current liabilities				121,668	119,501	100,801	197,763	194,619
Non-current liabilities
Interest-bearing liabilities				677,884	753,002	950,904	956,795	579,967
Subordinated debt - capital notes				123,772	123,756	123,720	121,510	149,644
Subordinated debt - SKYCITY ACES				186,538	161,410	177,956	-	-
Deferred tax liabilities				77,891	52,992	60,596	45,438	-
Derivative financial instruments				23,561	50,774	3,072	-	-
Convertible notes				-	-	-	-	8,910
Other term liabilities				-	-	-	-	27,216
Total Non-current liabilities				1,089,646	1,141,934	1,316,248	1,123,743	765,737
Total liabilities				1,211,314	1,261,435	1,417,049	1,321,506	960,356

Interest cover (EBITDA/Net Interest)				3.8x	3.3x	3.3x	3.4x	5.1x

Full 5 Year Financial Summary

We can see then that debt incurring interest or charges (of all different types) nearly doubled from 2004-2006 to over NZ $1.3 billion at its highest (due mainly to buying and financing Adelaide and Darwin casinos and cinema assets.) but since then, at balance date 30 June 2008, (Bruce's debt level comparison date) debt had been paid down to just under $1.1 billion.

In addition to that, the company has paid back $84 million with the proceeds of a capital raising and other debt reductions to take total debt to below $ 800 million, still high but more manageable and it leaves net debt to ebitda ratios that Bruce worried about down from 3.8x in June 2008 to below 2.5x as at 9 July 2009, the lowest ratio in 5 years.

This has further been alleviated by a large increase in profit and revenue for the 2009 Full Year result to be announced 26 August.

As I said above, debt levels are still very high but steps have been taken to change that and with good management the company has put itself in a position so that the business is functioning well and is an even better position now to consolidate this debt.

As interesting as Bruce Sheppard's company debt analysis has been it would be even more interesting to see how June 2008 stacks up with June 2009.

In Sky City's case I think he might assess that they have addressed his worries.

They have mine.


Disclosure: I own SKC shares in the Share Investor Portfolio

Sky City Entertainment Group @ Share Investor

• 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
• Sky City share offer confusing and unfair for smaller shareholders
• Sky City CEO doubles down
• Sky City Entertainment 2009 Interim Profit Review
• Sky City Entertainment 2009 Interim Result Preamble
• 2008 Sky City profit analysis
• 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 this stock @ Share Investor Forum

Related links

You have to register at Share Investor Forum to see this content

Full 5 Year Financial Summary - Where the table above comes from
Correspondence between Bruce Sheppard & Sky City over debt levels
Sky City July Debt payback

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