SkyCity mum on Australia takeover rumour

Chinese Dragon and Lion lanterns at the main entrance to SkyCity as part of Chinese New Year celebrations. SkyCity won't comment on Star takeover rumours. Photo / Dean Purcell.

SkyCity is staying tight-lipped about speculation it could become a takeover target for Australian casino operator The Star Entertainment Group.

The Australian Financial Review reported this week that that The Star's capital commitments to upcoming projects were modest and "well placed" market sources reckoned the company may consider launching a bid for the New Zealand casino and hotel company.

"The Star could boost its domestic footprint with SkyCity's Adelaide and Darwin facilities," the AFR's Street Talk column wrote on Wednesday. "But the big prize would be gaining exposure to SkyCity's Auckland and Queenstown casino cash cows which are raking in revenues and luring prized high rollers from Asia."

The Star's properties include Jupiter's Hotel & Casino on the Gold Coast and Brisbane's Treasury Casino & Hotel.

Possibly buoyed by takeover rumours, SkyCity shares - which recently traded at $4.94 - have gained 4.2 per cent since Wednesday morning.

"We do not comment on media speculation," a SkyCity spokeswoman said today when asked about the AFR article.

The Star is taking a similar approach.

"We don't comment on speculation and rumour," a spokesman said.

The Star, with a market capitalisation of A$4.6 billion ($5.1 billion), is worth almost twice as much as SkyCity.

The Australian firm has a relatively modest net debt-to-earnings multiple of one times, while market expectations are for it to generate more than A$2 billion in cash between 2017 and 2020, according to the AFR, suggesting a major takeover bid could be embarked upon.