Daily ShareChat: Sky City

Casino operator Sky City Entertainment Group's first quarter performance was pleasing with underlying revenues up 3.3% and normalised net profit growing by a similar margin, says Nachiket Moghe, an analyst at Aegis Equities Research.

Excluding the cinema business, underlying net profit was up 5%. “This was a pleasing performance, given the economy in New Zealand and headwinds in Darwin,” Moghe says.

The company didn't provide any guidance at its annual shareholders' meeting but said it would be disappointed if it didn't achieved analysts' consensus of a $127.4 million net profit for the year ending June 2011.

“We are modestly cutting our financial 2011 forecast to $129 million to bring it closer to consensus forecast,” Moghe says.

“We should see a pickup in second half earnings, especially for Darwin as comparisons become easier. However, the Auckland performance is a big unknown,” he says. That's because of the weak economy.

The Rugby World Cup should significantly boost earnings in the six months ending December 2011 and Moghe is forecasting a $140 million net profit for the year ending June 2012.

He values the shares at $2.60 and says any strength in the share price should be used to book profits.

Recommendation: Accumulate.

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