Daily ShareChat: Sky City Entertainment

By Jenny Ruth

Thursday 22nd October 2009

The largest issue Sky City Entertainment Group faces is turning around its Auckland gaming machine performance after an 11% decline since its 2004 peak, says First NZ Capital analyst Rob Bode.

The Auckland gaming machine business "has been showing signs of stabilisation and has been gaining share against pubs/clubs, thanks to layout improvements make on Sky's main gaming floor, introduction of new product and heavy promotional activity," Bode says.

In the six months ended June, Sky's Auckland gaming machine revenues contracted 0.9% compared with a 5.2% reduction in New Zealand-wide pub/club gaming machine spending, he says.

"While Sky's 2009 Auckland machines revenues were the notable disappointment in an otherwise very good result, it was noteworthy in the June quarter that Auckland city pub/club spend was very weak (down 9.5% on the previous comparable period), suggesting Sky Auckland's marketing programs were being highly successful against competing venues in the immediate vicinity."

A 10.8% fall in pub/club gaming machine revenues in Auckland City in the September quarter when pub/club revenue New Zealand-wide was down 5%, suggests that trend has continued.

"It would seem reasonable to assume that Sky Auckland has continued to achieve superior performance to pubs/clubs but revenue performance is probably still not yet in positive territory."

BROKER CALL: First NZ Capital rate Sky City as neutral.

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