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South Australia approves ‘game changing’ SkyCity casino licence, allowing A$300M investment

Friday 26th July 2013

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The government of South Australia has passed a law extending SkyCity Entertainment Group's exclusive casino licence, clearing the way for a A$300 million expansion of its riverside complex.

Analysts say the Adelaide development is much more of a game-changer for the casino and hotel company than its politically contentious deal with New Zealand's government to build an Auckland convention centre in exchange for increased gaming concessions.

The amendment to the state's Casino Act allows for a 20-year extension of SkyCity's exclusive casino licence until 2035, the introduction of cashless gaming and ticket in, ticket out (TITO) technology, lower gaming tax rates for VIP gaming, an increase in slot machines by about a third to 1,500 and an increase in gaming tables to 200.

The investment in the site on the banks of the River Torrens includes a 6-star hotel, restaurants and new gaming facilities. The state government has called the development "the jewel in the crown" and touted its benefits to tourism and job creation.

High class entertainment precincts with luxury VIP facilities "are vital to attracting high end Asian, particularly Chinese tourists," chief executive Nigel Morrison said in a statement. "Our development will help South Australia attract a greater share of this lucrative and growing market."

The company will be allowed to lift higher maximum bets, jackpots and cashless gaming transaction limits in VIP Premium rooms under its agreement with the state, first announced last December. The agreement also sets new tax rates for gaming with an increase in non-VIP electronic games to a maximum of 41 percent from 34.4 percent and a new VIP electronic game tax of 10.9 percent. Non-VIP table game tax rates increase to 3.4 percent from 0.9 percent while VIP table games stay at 0.9 percent.

Forsyth Barr analyst Jeremy Simpson said in a May report that SkyCity's major opportunity in Adelaide is in the electronic gaming machine market, of which its casino has only an 8 percent share of the city's market for slot machines.

With current restrictions, Adelaide Casino's daily win rate per slot machine is about $180, compared to A$300 in Queensland, A$400 in New South Wales and Victoria and $360 in Auckland, Simpson said in his report.

"The Adelaide Casino under-performs many other casinos in Australia and New Zealand on a number of metrics, and what is proposed in Adelaide will level the playing field in a number of areas," he said.

Shares of SkyCity last traded at $4.20 and have gained 11 percent this year. It is rated a 'buy' based on the consensus of eight analysts surveyed by Reuters, with a median price target of $4.75.

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