Tuesday, March 16, 2010

Asia Pacific News: SkyCity Half-Year Up 30%, by Greg Tingle - 15th March 2010

We continue our global coverage of the land based and online casino sector with more healthy reports from the Asia Pacific region. Seems Australia's casino king of Crown Limited fame isn't the only one laughing all the way to the bank. The Kiwi's are giving the Yanks and Aussies a run for their money. Skycity's Australian business helps balance the books. Media Man and Gambling911 report.

Casino and hotel operator Skycity Entertainment Group has posted a solid after-tax profit, almost 30% up on last year's half-year to December result, and appears set to deliver double-digit profit growth of up to 15% for the full year. Of course, critics will argue that they are attracting more "problem gamblers".

The positive result was assisted by a combination of factors...lower net interest expenses, which included a $1.9 million gain from the buy-back of an American private placement debt, and better international business growth in Adelaide and Darwin casinos.

SkyCity shares jumped 11c to $3.24, after the announcement.

Total revenue was up 5.9% from $422.1 million to $446.9 million, earnings before interest and tax were up 9.5% at $122.3 million while its after-tax profit was up 29.6% from $54.7 million to $71 million.

Craigs Investment Partners broker Chris Timms advised the figures suggested a "solid result" when overall market conditions for the half were reported to have been challenging.

"Trading was reported to have weakened at the end of the first half.

"In Australia, that was due to the tailing-off of the (Government) fiscal stimulus package," he said. Readers will recall the stimulus that went to homes often ended up in pokie slots and on the table greens, both in Australian and Macau instances.

Forsyth Barr broker Peter Young said the result was in line with the expectations of both Forsyth Barr and market expectations.

"Aussie casinos had 7% growth in ebitda [earnings before interest, tax, depreciation and amortisation] and remain the standout, while the key Auckland casino continues to struggle to record growth," Mr Young said.

Mr Timms advised the contribution from the Australian casinos was about 33%.

Adelaide, which was expected to be a "star performer" came in below expectation, while Auckland's contribution was "flat as expected".

The decline in gaming revenue was offset by higher earnings from non-gaming activities.

Skycity reiterated expectations of posting a full-year normalised after-tax profit in the range of 10%-15% higher than the the previous year's result, and excluding the gain from cinema sales, would translate to a profit range of $126.8 million to $132.6 million, Mr Timms said.

"We believe this is a credible target, given the second-half trading will not be getting the support of the cinema business.

"We are currently forecasting at the low end at $127 million, while (analysts') consensus is at $131 million," Mr Timms said.

Mr Young advised in excluding cinema sales and international business growth, revenue was close to expectations, but Auckland's gaming decline disappointed slightly.

"Earnings before interest, tax, depreciation and amortisation was $160.1 million, up 7.8% on the same period last year, which is a solid result in the operating climate.

"But like recent periods, that was largely driven by Australian operations," Mr Young said.

Last January, Skycity completed the sale of its cinema interests in New Zealand and Fiji, including interests in the Rialto group, for $61 million, to cinema and exhibition operator ASX-listed Amalgamated Holdings Ltd.

The sale included Skycity's core cinema businesses in New Zealand and its joint-venture interests in both Rialto and Fijian interests.

New Zealand may known as the land of sheep, outnumbering humans 12 to 1, but the solid results from our Kiwi friends show that they are anything but sheepish, nor are they following the Las Vegas Strip financial train wreck like results of many. Good punting.

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