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Daily ShareChat: Sky City

By Jenny Ruth

Sunday 4th July 2010

Text too small?

The regulatory cloud which has overhung Australia's casino sector since late 2009 looks to have been removed by the government endorsing voluntary pre-commitment as the preferred way of targeting problem gambiling, says Rob Bode at First NZ Capital.

That's even though the more draconian recommendations seemed very unlikely with the more severe measures unlikely to pass a cost/benefit test, Bode says.

"For Sky City Entertainment Group, not only does this remove risk of substantial erosion of gaming revenues for its Australian properties ... but it also avoids an unhelpful precedent being imported to New Zealand," he says. The Adelaide and Darwin casinos contribute about 30% of Sky's group earnings before interest and tax (EBIT).

"Following the introduction of the Gambling Act 2003, New Zealand has been ahead of Australia in terms of introduction of harm minimisation measures and this has undoubtedly been a factor contributing to lacklustre performance of gaming machines over the past six years," Bode says.

"If Australia had leapfrogged New Zealand in implementation of harm minimisation measures, it would have probably only been a matter of time before New Zealand followed suit."

Bode says it looks like the Australian changes will be relatively drawn out and manageable for the industry.

Recommendation: Outperform.

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