Forum Archive Index - March 2003

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

Title:

Hi LazyHaggis,

>

> Sky City Entertainment depends heavily on tourism (particularly from

> Asia) for it's current business success and long-term growth

> opportunities. Clearly there is debate and differing opinions

> regarding the impact and outcome of the deadly mystery pneumonia

> virus, and the invasion of Iraq by the USA-Coalition forces,

>

> Personally, I expect SKC shares to tumble below the $5.00 mark within

> a few months.

>

That's a big call Lazy Haggis.   I'm curious as to how you come up with the 'below $5' figure.   Since you seem to have pulled the figure out of the air I assume you are justifying your figures based a hypothetical drop in tourist numbers.  However, even this tourism downturn figure you haven't predicted.

I suspect that over the next few months there will be a drop in overseas tourist numbers (it is the winter after all) but it is a big call to say that any war in Iraq will still be affecting sentiment for holidaying in NZ in nine months time.   Ditto with the Asian flu.

The reason I disagree with your assessment of the situation is that I believe your opening statement:

"Sky City Entertainment depends heavily on tourism (particularly from

Asia)"

is untrue.

Here is what Sky City say about their business in the 1999 investment statement (from p20):

"Around 75% of Sky City casino customers are drawn from the Auckland Metropolitan region.   Visitors to Auckland from elsewhere in New Zealand make up approximately 15% of Casino customers with the balance (10%) represented by overseas visitors."

The statement that Sky City depends heavily on Asian tourism is blatantly false.   Got that Lazyhaggis?   But let us for a moment follow through with your asian tourist collapse scenario and see where it leads us.  Let's put some numbers on it.

Let's say fully half of those overseas visitors to Sky City are high rolling Asian smokers (a figure I think you will agree is ridiculously over optimistic).   Let's say these Asian visitors are twice as profitable for Sky City compared to Sky City's regular customers.   Even if every one of these people went home and revenue dropped to zero from this group, a catastrophic assumption,  this means Sky City would lose 10%  of their revenues.  Sky City revenues were up 21% last year so your disaster scenario would see the SkyCity business plan back about 6 months.    Hardly enough of a set-back to see the shareprice plunge 40% I would have thought!

So next time you make one of your predictions of a share price plunge how about some stats and figures to back it up LazyHaggis?   I'm not saying you are definitely wrong, but you will have to produce a lot more coherent argument than simple fear mongering to convince me of that.

SNOOPY

discl: hold SKC

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