"For the bears, Adelaide is likely to disappoint again based on our estimate for its Ebitda to be down 21 per cent year on year to A$15 million as it travels through peak disruption and battles a soft macro environment. We also expect the underlying Adelaide performance coupled with incorporating a stronger New Zealand dollar-Australian dollar cross rate to be a source of net downgrade to consensus," they said.
They are looking for an update on progress on Adelaide and the NZ International Convention Centre, saying these projects are a window for judging future shareholder risk/reward at current valuation levels on SkyCity, which says it provides jobs for 6500 people here and in Australia.
"Unfortunately, with the NZICC discussions still a work-in-progress with the NZ Government, we are not expecting SkyCity to be able to provide a lot of clarity around any adjusts to the capital profile for this project," they said.
The analysts predict Adelaide will outstrip Auckland by 2020.
"Our bullish outlook is based on its tourism appeal (Barossa, golf), solid direct air access into China (Hong Kong), Singapore and Malaysia coupled with the transformation project creating an improved value proposition to capture a second tier market to Crown and Star with a broader gaming offer, high-end food and beverage and presidential style hotel rooms," they said.
Analysts Marcus Curley, Sam Theodore and Rohan Sundram at USB pointed to strong Auckland hotel revenue.
"SkyCity's Auckland hotels have also performed strongly on the back of higher occupancy and room rates. This is consistent with the broader New Zealand hotel sector with the Tourism Industry Association reporting an occupancy lift by 3 per cent and daily rate by 3 per cent in 2014.
"The New Zealand hotel occupancy rate at 78 per cent in 2014 is the highest level in 10 years," they said in their report. They lifted their non-gaming revenue growth at Auckland Casino from 1 per cent to 10 per cent in 2015 and were optimistic about the knock-on effects of the new Federal St shared space.
"Our revised food and beverage revenue incorporates annualised benefits from restaurant openings coupled with higher foot traffic from an improved streetscape. A similar streetscape redevelopment of Fort St in Auckland City resulted in foot traffic increasing by 50 per cent during peak hours," they said.
The Bloomberg consensus of analysts' forecasts for net profit after tax is $134 million in 2015, rising to $147 million by next year and $157 million in 2017.
