Daily ShareChat: Sky City Entertainment

By Jenny Ruth

Wednesday 17th June 2009

Sky City Entertainment Group's most likely use of the funds from its recent $228.3 million capital raising to repay early some of its US private placement debt, says Jeremy Simpson, an analyst at Forsyth Barr.

He expects the themes shown in the three quarters ended March of strong performance from the Australian casinos and a reasonably resilient Auckland casino will continue in the June quarter.

"However, given the tough operating environment in New Zealand, we have taken a slightly more cautious view on Auckland which has been partially offset by a slightly stronger view on Adelaide and Darwin," Simpson says.

He has lowered his forecast for net profit for the year ended June to $102.5 million from $105.3 million. The company's guidance is between $99 million and $106 million. Simpson has raised his profit forecast for the year ended June 2010 by 2.9% to $118.4 million because a 4% lower estimated operating earnings result will be offset by sharply lower interest costs.

Simpson has also cut his valuation from $3.45 to $3.20, still well above yesterday's $2.75 closing price.

"We remain positive about the turnaround impact from the new and strongly gaming-focused management." While the soft New Zealand economy is a near-term risk, the company is well-placed for medium-term operational upside, he says.

BROKER CALL: Forsyth Barr rate Sky City Entertainment Group (NZX: SKC ) as BUY.

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