Thursday 9th August 2018
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Shares of SkyCity Entertainment Group rose to a month high as analysts were buoyed by the casino company's better-than-expected full-year earnings report yesterday.
New Zealand's only listed casino company yesterday posted a 5.5 percent lift in 2018 normalised earnings before interest, tax, depreciation and amortisation to $338.2 million, boosted by a lift in its high-roller business and ahead of its forecast for 3 percent growth.
The shares were the best performer on the benchmark S&P/NZX50 Index yesterday, up 2.5 percent, and rose a further 2.2 percent in trading today to hit a month high of $4.17.
The improved result was welcomed by analysts at Forsyth Barr, First NZ Capital and Craigs Investment Partners who all raised their target prices for the stock and their ebitda forecasts for the next few years following the better earnings. Still, despite the more upbeat tone, none of the analysts raised their recommendations on the stock which remained at 'neutral' or 'hold' amid uncertainty about the company's large investment projects in its properties in Auckland and Adelaide designed to boost future earnings.
"We retain a 'neutral' rating," Forsyth Barr analyst Chelsea Leadbetter said in her report. "SkyCity has a casino monopoly in all its markets and significant term on its exclusive licences. However, we remain concerned about the ability to grow local gaming longer-term in Australasia without significant capex programmes.
"In the short to medium-term, focus will remain on the major projects underway in Auckland and Adelaide," Leadbetter said. "The extent of the long-term prize from investment will remain uncertain until each is complete, with SkyCity looking to capitalise on expected higher visitation and better access/carparking. However, a material uplift in earnings is required to meet the company’s return hurdles/targets.
"We see the risk/reward as evenly balanced."
Auckland-based SkyCity said yesterday it expects "modest growth" in earnings in the current financial year, implying a 3-to-4 percent lift in ebitda, driven by higher earnings from its international high-roller business and its flagship Auckland casino.
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