Investment manager says major projects ahead including convention centre will test management team.
SkyCity Entertainment Group's slight drop in bottom-line profit left the investment community cold, as the business faces a huge transformation and capital expenditure.
Tyndall Investment Management's Rickey Ward said yesterday's annual result disappointed at almost every level.
"This company seems to have a book of excuses, every year missing market expectation, albeit by modest amounts, with a reason to justify it," Ward said.
Shane Solly of Mint Asset Management pointed to SkyCity being in a tougher spot than anticipated and although shareholder returns rose in spite of the fall in profit he expressed concern about big changes at the business.
"It's been a very busy year for SkyCity and another very busy one coming up. Certainly a period of transition and investment that will test the management team. This has been a tougher year than many had expected," he said.
SkyCity is forking out $780 million in the next six years on big projects including the NZ International Convention Centre and expansion of its Adelaide property.
Nachi Moghe of Morningstar expressed unease about two New Zealand casinos but was more chipper about Australian properties.
"The Auckland performance was disappointing," Moghe said. "I was expecting some growth. Hamilton was also soft. Darwin and Adelaide were okay."
Even chief executive Nigel Morrison said the drop in net after-tax profit from last year's $141.4 million to $136.3 million for the June 30, 2013 year did not please him.
"Personally, I think it's a little bit disappointing," Morrison told yesterday's annual results presentation although he emphasised that shareholders were still ultimately winning, as dividends rose from last year's 17c a share to 20c this year.
Solly said he certainly approved of the dividend increasing.
The reasons SkyCity cited for the profit drop were the long hot summer which kept people away from casinos, the drought in the Waikato which affected the Hamilton casino, big gains in the 2012 financial year from the Rugby World Cup, the sale of SkyCity's half-share in the Christchurch Casino so there was less revenue throughout the whole year, and the strong New Zealand dollar.
Luck has been on SkyCity's side, though, when it comes to international visitors playing the card game Baccarat, which Morrison said was popular with Asians because gamers had a higher chance of winning on this game compared with others such as Black Jack.
A theoretical 1.35 per cent of the revenue gambled on Baccarat is expected to be won by casinos but Morrison said SkyCity enjoyed a "strong win rate of 1.64 per cent" in the second half of the June 3013 year.
"We turn over $6 billion in bets of up to $200,000 a hand," he said.
SkyCity is doing up a Queenstown hotel it does not own, providing Horizon suites for its VIP international high-rollers but James Burrell, chief financial officer, said only about $1 million was being spent.
Morrison confirmed SkyCity's interest in the Queenstown Lakeview Holiday Park at the top of Man St overlooking the township, where speculation is that the gaming business wants to build a new casino, international convention centre, hotel, restaurants and bars.
"That site could work," Morrison said of the property. But added any decisions about that were not up to the company but in the hands of the Queenstown Lakes District Council.