Proposed anti-smoking law sends Sky City plunging

By NZPA

Wednesday 19th March 2003

Tougher than expected proposals to ban smoking in bars and casinos has seen more than $130 million in the value of Sky City Entertainment shares go up in smoke today.

The operator of casinos in Auckland, Hamilton and Queenstown saw its share price plunge 66 cents to $8.10 close to midday today -- a drop of 7.5 percent.

Brokers said the surprisingly strong anti-smoking law proposal was to blame.

A parliamentary health select committee yesterday tabled a report which said ventilation would not provide enough protection for employees from second-hand smoke. Instead, it proposed a total ban on smoking in bars and casinos.

The public consultation process is complete and it is now up to MPs to make any further changes. With the Labour and Green parties supporting, it is considered likely to pass into law largely as the select committee has recommended. Scope for further lobbying by the hospitality industry is limited.

John Cobb, manager of private stock broking for JB Were, said there was concern that Sky City would be affected by the proposed legislation.

Many of its big spending clients are Asian, a high proportion of whom are heavy smokers. Non-New Zealand Asians who comprise many of Sky's big rollers might choose other destinations than New Zealand to pursue their gambling.

"A lot of their gamblers do smoke and I guess there is a concern that if they are not allowed to smoke, then it may put some people off," Mr Cobb said.

JB Were's assessment of Sky City was that it was not a major blow for the company as 40 percent of their gambling areas were non-smoking anyway and more than half of the areas where the bulk of revenue is generated -- on the tables -- were also already smoke-free.

"You are talking significant change for them, but not necessarily massive," Mr Cobb said.

He said Sky City was vulnerable to a sell-off because the stock had had such a good run in the last few years and was assessed as close to "fully valued".

The stock has soared from around $3.00 three years ago and hit of a peak of $9.10 in late January.

There was heavy turnover worth more than $5 million.

Sky's 50.2 percent owned subsidiary, Cinema operator, Sky City Leisure, fell even more heavily in percentage terms -- 16 percent -- 25 cents to $1.30.

A spokeswoman for Sky City said the company was looking at the provisions of the bill as it was reported back.

"Much of the content was as we expected," she said. "The parliamentary process still has some way to go and we'll certainly maintain an interest in the process."

She said the company would comment later today on how the proposed legislation as it stands might affect it.

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