Forum Archive Index - March 2003

["tennyson@caverock.net.nz" <tennyson@caverock.net.nz>]

Hi LazyHaggis,

>
> Sky City Entertainment shares could fall much further than the
> negative effect caused by the tough anti-smoking legislation if it is
> passed as law.
>


Apparently smoking has already been banned from the main gaming 
floor where the high rolling Asian tourists go.  If it was banned from all 
the pokie machines areas this IMO will be positive for SKC as the 
pokie pushers will have more money to gamble with.


> 
> The backlash effect (mainly from terrorism) caused by the Iraq war
> could have a severe negative impact on their share price (reduced
> world tourism). 
>
>


Or it could be positive for SKC, as tourists seek the safe haven of the 
South Pacific.


>
>
> Also, depending on the outcome of the mystery global
> deadly pneumonia virus originating from Asia (SKC is inundated with
> Asian tourists) this could have a significant negative impact on their
> share price.
> 

How many cases of this new virus have been reported in Japan?    
How many in Korea?   I suspect this virus will also be positive for SKC 
as tourists from those countries seek 'safe haven' destinations to visit.

>
> In addition, SKC has a P/E of around 18, and with forecast earnings
> growth of only 7% over the next two years, the stock is well
> overvalued in the current economic and geopolitical climate.
> 
>

The share is still priced on a good yield and it is far from clear if any of 
the effects you have pointed out will be negative.    SKC is certainly not 
well overvalued.

>
>
> SKC has ample opportunity to decline much further, and almost
> certainly will do so.
> 
>

This conclusion does not follow.   SKC may indeed decline much 
further but the underlying yield will limit any decline.  If SKC does 
decline further, my prediction is that this will having nothing to do with 
war in Iraq, a superflu or smoking legislation.  There are other risks in 
the SKC business plan that are far more significant than these global 
sideshows.

SNOOPY



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