FIRST CUT: SkyCity first-half profit rises 30%, helped by 'high rollers'

Thursday 11th February 2016

SkyCity Entertainment Group, New Zealand's only listed casino company, posted a 30 percent gain in first-half profit, citing improvements across all its properties and lower funding costs.

Net profit rose to $71 million, or 12 cents per share, in the six months ended Dec. 31, from $54.6 million, or 9.3 cents, a year earlier, the Auckland-based company said in a statement. That's at the top end of the company's forecast range of $69 million to $71 million. Revenue increased 14 percent to $566 million.

SkyCity, which has four casinos in New Zealand and two in Australia, benefited from improved trading at all its business. Its international business, the term it uses for 'high roller' gamblers, had record activity for the period with group turnover up 51 percent to $7.2 billion.

"We have continued to achieve strong growth across our New Zealand properties and International Business," said chief executive Nigel Morrison. He said trading in January was broadly consistent with the trends seen in the first half of the year.

The company will pay a first-half dividend of 10.5 cents a share on March 18, up from 10 cents a year earlier.

“There has been a lot of trading in Skycity shares with average volume being 1.38 million shares in the last 3 months” said Kevin Dutta-Gupta, GM Research at Investment Research Group (IRG) Limited.

“While Auckland and Hamilton increased revenue by 7.4% and 9.9% respectively, Skycity’s Queenstown and other business almost doubled its revenue from $7 million to $13.7 million compared to the previous corresponding period due to significant IB and local gaming activity."

Mr. Dutta-Gupta at IRG Limited also stated "In Australia, Adelaide improved revenues by 18.7% while Darwin was comparatively flat with an increase of 2.6% only. Capital expenditure is expected to increase over the next few years due to NZICC, Hobson Street hotel project and Adelaide redevelopment. However, following the recent $125m NZ bond issue, SKYCITY now has $322m of committed undrawn bank facilities – sufficient headroom to fund the committed NZICC and Hobson St hotel projects. Current debt funding headroom is expected to be sufficient to meet expected funding requirements until at least the start of FY18 as stated by Skycity.”

The shares last traded at $4.44, and have gained 14 percent the past year. The stock is rated a 'hold', according to 11 analyst recommendations compiled by Reuters, with a mean target price of $4.64.

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