Sunny side bets

Sun International could make three clever moves while punters fixate on bigger issues

Gaming and leisure group Sun International’s year to end-June results reaffirm that the big bet for growth in a dour local economy lies in The Time Square casino, set to open in Menlyn, Pretoria in April 2017. It will cost R4.1bn and will be SA’s second-largest casino, behind Cape Town’s GrandWest.

It could be a game changer for Sun. But I reckon punters should keep tabs on three smaller side bets that Sun may put in play. The first is hinted at by its new segmental reporting format, where its so-called “smaller urban casinos” — Windmill, Meropa, Flamingo and Golden Valley — have been lumped together. Surprisingly, and in contrast to a mediocre performance from the larger casino properties, the collective small casino revenues grew 12% to R952m and operating profits by 8% to a not insubstantial R223m.

I have long argued that Sun — especially as its Latin American footprint extends — should relieve management of the hassle of smaller casinos, which are overshadowed by GrandWest, Sibaya and Carnival City. Then again, the collective value of the smaller properties — operating in centres where casino complexes might be the biggest attraction — is apparent. It’s probably not the right time for Sun to put these properties on the market, but when economic conditions improve there may be an opportunity to fetch an excellent price for a smaller casino conglomeration or to hive off individual properties.

The second side bet that already appears to be paying off is Sun’s tilt at limited payout machines (LPMs) — through its 50% stake in GPI Slots — and sports betting, via Sunbet. This alternative gaming hub, which I suspect is dominated by LPMs, managed an 18.5% hike in revenue to R967m and a 23%