Forum Archive Index - February 2003

["G Stolwyk" <stolwyk@wave.co.nz>]

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Friday February 21, 3:26 AM
NZ's Sky City Expected To Post Sharp Rise In 1H Earnings
By Shri Navaratnam

Of DOW JONES NEWSWIRES

WELLINGTON (Dow Jones)--Sky City Entertainment Group Ltd. (A.SKY), a New Zealand-based casino operator, is expected Tuesday to confirm expectations of robust first half earnings, driven by its Auckland and Adelaide casinos.

"It will be a great result," said Anthony Aboud, Sydney-based analyst at UBS Warburg, summing up the widely held view among analysts that the company is on a roll.

Sky City is expected to post a first half to Dec. 31 net profit of NZ$52 million, up 37% from NZ$37.9 million before charges in the year-ago period, according to a Dow Jones Newswires poll of five analysts.

The corresponding half-year's accounting net profit of NZ$10.1 million was hurt by a one-off charge of 27.8 million relating to Sky City's 50.2% owned cinema operator, Sky City Leisure Ltd.

The cinema operator has turned around from a loss to record a small net profit in its latest first half - another favorable story for Sky City, which fended off calls to sell the unit.

Rob Bode, head of research at First NZ Capital, said Sky City's announcement to the market in December confirmed the strong growth of its key Auckland and Adelaide casinos.

In that announcement, Sky City said that Auckland casino revenue was up 15% in the first five months, while Adelaide sprinted ahead by 18% on-year in the same period.

Bode said there is likely to be welcome growth in earnings and revenue from Adelaide after some disappointment in the previous half year, which was hurt by increased investment costs.

"But now you see that cost is under control and revenue growth is coming through," he said. "The market's got a little more confidence that their (Australian) strategy has been correct...so Adelaide should produce a lot better performance."

UBS Warburg's Aboud agreed, saying the Adelaide casino will produce a much improved result on top of a strong performance from the pivotal Auckland casino.

Analysts are forecasting group earnings before interest, tax, depreciation and amortization at NZ$125 million, up from NZ$103 million.

Adelaide revenues are forecast at NZ$56 million, up from NZ$47 million in the year-ago period and Auckland revenue is seen rising to NZ$196 million from NZ$170 million.

Three of the five analysts expect the company to pay a dividend of between 22 cents and 24, compared to 15.5 cents a year earlier.

Bode said the market will be closely focused on the company's earnings outlook. "The result will be superb, no doubt about that. The question will be one of sustainability," he said.

"If the market can get a feel that the growth can be sustained then the (recent share price) movement can definitely be justified," Bode said.

Sky City catapulted to a record NZ$9.01 last month, aided by a combination of a favorable earnings outlook and takeover activity in the Australian casino sector. The stock has since pulled back on profit-taking, closing Thursday at NZ$8.38.

-By Shri Navaratnam, Dow Jones Newswires; 644 4715990; shri.navaratnam@dowjones.com