Daily ShareChat: Sky City Entertainment Group

By Jenny Ruth

Wednesday 11th November 2009

Sky City Entertainment Group's shares represent good value, given its strong cashflow, security of licence tenure and the restricted competitive environment, says First NZ Capital analyst Rob Bode.

"Also, with the balance sheet now on a strong footing, Sky City is well-placed to take advantage of growth opportunities that may arise," Bode says.

The company's first-quarter results were solid, he says. The company said first-quarter revenue was up 3.6% on the previous first quarter and, normalising for theoretical win in the international business, was up 4.7%.

"Although still cautious regarding the economic outlook in both New Zealand and Australia, management reiterated previous guidance of net profit growth targeted at double digits," Bode says.

The Australian properties continue to perform well with Australian revenue growth exceeding 7%. The highlight was the Adelaide casino which produced 7.7% revenue growth including gaming machine growth of 9%. The Darwin casino produced 7% revenue growth following completion of its $A40 million ($NZ50.7 million) expansion and refurbishment.

Auckland revenues were up only 1% with gaming machine revenues flat "but this was a fairly encouraging outcome, given the recently reported performance of pubs/clubs which were very soft," Bode says. "Sky City is clearly gaining market share in Auckland city with its improved offering."

BROKER CALL: First NZ Capital rate Sky City Entertainment as neutral.

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