Daily ShareChat: SkyCity

Sky City Entertainment's flagship Auckland casino's earnings are still soft but its international or VIP business is "going great guns," says Nachiket Moghe, an analyst at Aegis Equities Research.

"The international business was the pick of all businesses with turnover doubling to $1.48 billion," Moghe says. Overall, the results were in line with his expectations.

"The major impetus in future is likely to come from growth operations which management outlined in detail," he says.

Auckland will see an increase in VIP gaming capacity ahead of the Rugby World Cup (RWC) and is likely to result in increased business. A lagoon resort in Darwin costing A$40 million (NZ$54.2 million) is also a bid to attract international premium players, Moghe says.

Management is sticking with its full-year guidance of $127 million for the year ending June, essentially in line with last year, excluding the now sold cinemas business and Moghe is picking it will come in at $129 million.

"We think full-year 2012 will be the year to watch with growth coming from higher traffic at the casino and hotels in Auckland because of the RWC," he says.

Management expects first-half 2012 earnings before interest, tax, depreciation and amortisation (EBITDA) will increase by between 20% and 25%.

Recommendation: Accumulate (upgraded from hold).

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