Forum Archive Index - March 2004
Please note usage of the Forum is subject to the Terms & Conditions.
Re: [sharechat] SKC
Title:
Hi winner69,
>
>Snoopy - good
work re your analysis of Darwin and SKC
>
>Do you remember
our raves on the message board about the high
level of
>debt that SKC
has. What is your take on the new debt they are taking
>on to fund Darwin
- ie taking debt to $800M compared to shareholder
>equity of $240M
odd.
>
For FY2004, let's assume a poor
performance scenario of a flat profit
for SKC this financial year of $107.1m, with debt rising by $200m to
$825m.
This gives a minimum long term debt
repayment time of
$825m/$107.1m= 7.7 years
I am quite comfortable with that.
I noticed in the FY2003 annual report
that there was a significant
increase in current accrued expenses. I expect this is due to the
development of the Auckland convention centre venue. But if that
figure doesn't go down after the convention centre is opened, then this
could be an early warning signal to watch for!
Longer term I think it is worth asking
the question whether SKC is
falling into the 'institutional imperative' trap. That means getting
bigger for the sake of it, rather than carefully deciding whether the
expansion will add shareholder value!
I think SKC can add value in Australia
by transforming what was just a
'casino' into a more general destination venue, whether that be through
live entertainment, a tourist destination in its own right (think
Auckland's Sky Tower) or conferences. If the grand Oz plan doesn't
work out, those Australian assets would be readily saleable should
SKC 'suddenly' need the funds. This is a further reason why I think
that SKC is not that risky, despite what is 'conventionally' thought of as
a high ratio of debt to shareholders funds.
>
>Are you concerned
that they appear to be able to borrow another
>$200M on top of this ... to fund
further acquisitions?
>
No, I am relieved that they have the
ability to do that! But I would be
concerned if SKC went off on another unrelated business tangent with
that money. I would like to see the Auckland convention centre
working well before they funded yet another acquisition.
SNOOPY
--
Message sent by Snoopy
on Pegasus Mail version 4.02
----------------------------------
"Stay on the upside of the downside,
Anticipate the anticipation!"
References
See IRG research reports
