Anne Gibson

Anne Gibson is the Property editor of the NZ Herald

SkyCity's fortunes on a roll

$402 million deal with Govt to run International Convention Centre tipped to boost firm's value by $200m.

SkyCity has been granted 230 extra machines and 52 new gaming tables. Photo / Supplied
SkyCity has been granted 230 extra machines and 52 new gaming tables. Photo / Supplied

The value of SkyCity Entertainment Group could get a $200 million boost after a $402 million deal announced yesterday by the Government to develop and operate the NZ International Convention Centre.

Morningstar's Nachi Moghe estimated a 35c-a-share value increase on the $2.5 billion company which has 576,958,340 shares on issue.

He is now recalculating revenue and profit projections on the NZX-listed company - whose shares closed up 10c at $4.50 yesterday.

SkyCity said it would commit $315 million to build and fit out the convention centre, in addition to contributing the 14,000sq m site, bounded by Nelson, Hobson and Wellesley Sts, which was valued at $87 million.

The business could install extra poker machines and gaming tables in the next year, well before the convention centre is finished by 2017, according to Moghe.

He had expected SkyCity to get 350 new gaming machines and 20 new tables as part of the deal, but the company got 230 machines and 52 new tables.

Moghe said his 35c share uplift was calculated before yesterday's details were released but he expects to stand by it.

"This was based on 350 machines and 20 tables.

"The composition has changed to 230 machines and [52] tables and the cost of capital expenditure is also higher than the $350 million I was originally expecting.

"But I would still say, ballpark it's around those levels based on preliminary analysis," he said.

Forsyth Barr analyst Jeremy Simpson said the deal held no surprises and SkyCity could install the extra gaming facilities once it finalised the design of the new building, which could be next year.

"There's nothing unexpected. This is broadly in line with the sort of deal we were expecting SkyCity and the Government to announce," Simpson said.

SkyCity has issued profit guidance of $140 million for the June 2013 year but Simpson said the economic environment remained relatively soft and he is expecting about $138 million, predicting a share value uplift of 15c to 20c from yesterday's agreement.

Destination-type gaming could be developed in the SkyCity Grand building, expanding from the existing block, Simpson said. Moghe noted the business also planned a big reconfiguration of its Federal St entrance opposite the Sky Tower, expanding the existing level-one gaming floor.

Auckland Mayor Len Brown said Auckland could get up to 40 conventions a year, a "massive boost" to the business sector, particularly to retail, hospitality, tourism and hotels, and he predicted big job opportunities for Pacific and Maori youth.

"There will be a huge uplift in the retail, people will be out and spending," he said, citing food and the two big supermarket chains, Progressive Enterprises and Foodstuffs, which he said were just one example of an industry which stood to gain significantly.

Benefits would flow through the entire economy, he said.

"It's such a large facility, an extra $90 million to $100 million in Auckland annually, an extra 800 jobs," Brown said.

"The convention centre in Brisbane, every year they do around 80 conventions. If we did 40 a year, it would put us in a strong position."

The centre

* 350,000 extra visitor days annually
* $90m annual economic injection
* 1000 construction jobs
* 800 permanent jobs once finished
* 33,000 more conference delegate visits.

- NZ Herald

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