SkyCity, the listed casino operator, confirmed that it’s strategy is focussed on the long-term when it held its Investor Day recently. The ultimate favourable outcome of its plans to improve returns depend on new initiatives, and were thus unlikely to be evident, or realised, until the two chief projects are completed in the financial year for 2021 at the earliest. These two projects are the New Zealand Convention Centre, and the updating of Adelaide Casino.
Suzanne Kinnaird, a broker for Forsyth Barr, a New Zealand-owned investment firm, stated that there was nothing revealed at the Investor Day which changed her view of SkyCity. She said that the company saw opportunities for new management to make an improvement in terms of returns, although questions do remain as to how much of this yield may get eroded by being invested back into the business. She ended off by saying that Forsyth Barr viewed the ratio of risk to reward as balanced, and maintained a neutral rating.
SkyCity also played host to an accounting session, the most anticipated event of the day, which detailed the implications of its big projects on its balance sheet. Kinnaird confirmed that there were no undue implications for the cash flow.
SkyCity’s return profile after the projects would benefit from the accounting treatment. Earnings from the Convention Centre and Hobson St Hotel project were not likely to be enough to offset increased depreciation and higher interest expense after the projects reach completion in 2020.
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