Analysts approve of NZX-listed casino company’s performance as new 300-room five-star hotel announced
Analysts appear to be satisfied with SkyCity Entertainment Group's performance, despite a drop in annual profit.
Nigel Morrison, SkyCity chief executive and managing director, announced net after-tax profit fell from last year's $136.3 million to $123.2 million in the year to June 30, which
Goldman Sachs New Zealand's Marcus Curley said it was "in the middle of the Bloomberg market range [of $112 million to $131 million]".
Citi Research's Michael Goltsman in Australia said Auckland had performed strongly for the company, VIP business had "another record year" and the new 300-room five-star hotel announced yesterday was a third positive, with a big increase in carparking on the site to be redeveloped in Auckland.
Morrison announced an extra $170 million to $180 million would be spent on Auckland's new international convention centre - a hotel, more carparks and a new pedestrian walkway from Hobson St to Nelson St with bars, cafes and shops.
Economic Development Minister Steven Joyce said he looked forward to seeing SkyCity lodge its resource consent application later this year. The centre would be able to accommodate conferences of up to 3500 people, seat up to 3000 people in a plenary hall and host at least two events simultaneously.
An Auckland Council spokesman said due to its regulatory role, it was inappropriate to comment on the merits or otherwise of its design.
"The mayor has expressed his support for a world-class international convention centre for Auckland that will boost the economy and provide tourism and construction jobs," the spokesman said.
Macquarie's Warren Doak said the company's result was in line with the consensus $124.4 million forecast, trading in the second half of the financial year had been stronger than the first half and Auckland business had benefited from the completion of the Federal St shared vehicle/pedestrian space redevelopment and strong international business growth.
Bell Potter's Lafitani Sotiriou in Melbourne said SkyCity had delivered "a largely in-line result" which was reasonable and the recent share price weakness on the ASX appeared unwarranted.
"A quick way to look at the SkyCity result is [Australian dollars] normalised [earnings before interest, tax, depreciation and amortisation] is up 8 per cent over the last year, yet the [Australian dollars] share price is down 9 per cent - this is an anomaly that we believe is unwarranted and today's result highlights why SkyCity has been oversold recently," he said.
Curley noted that Morrison had not issued any guidance or outlook for the June 2015 year but said the company had pointed to overall revenue and earnings before interest, tax, depreciation and amortisation (ebitda) growth in the first six weeks, especially in Auckland.
Goltsman said the normalised net profit after tax was 3 per cent below Citi's forecasts of $127 million and the negatives were disruption at Adelaide where ebitda fell from last year's A$18.3 million to A$15.5 million and Darwin's 4.5 per cent ebitda gaming decline "as it struggles to drive sufficient international volume".
Curley is forecasting $145 million net profit after tax for the June 2015 year and has a buy rating on the company, saying the company was exposed to two high-quality projects in Adelaide and Auckland. Doak has a $4.68 valuation on the shares, which closed up 7c yesterday at $3.62.