SkyCity earnings please pundits
AUCKLAND: SkyCity Entertainment Group shares rose to a monthhigh $4.17 yesterday as analysts were buoyed by the casino company’s betterthanexpected fullyear earnings report.
New Zealand’s only listed casino company posted a 5.5% lift in 2018 normalised earnings before interest, tax, depreciation and amortisation to $338.2 million, boosted by a lift in its highroller business and ahead of its forecast for 3% growth.
The shares were the best performer on the benchmark S&P/NZX50 Index on Wednesday, up 2.5%, and rose a further 2.2% in trading yesterday to hit $4.17.
The improved result was welcomed by analysts at Forsyth Barr, First NZ Capital and Craigs Investment Partners, who all raised their target prices for the stock and their ebitda forecasts for the next few years. Still, despite the more upbeat tone, none of the analysts raised their recommendations on the stock, which remained at ‘‘neutral’’ or ‘‘hold’’ amid uncertainty about the company’s large projects in Auckland and Adelaide.
‘‘We retain a ‘neutral’ rating,’’ Forsyth Barr analyst Chelsea Leadbetter said in her report.
‘‘SkyCity has a casino monopoly in all its markets and significant term on its exclusive licences. However, we remain concerned about the ability to grow local gaming longerterm in Australasia without significant capex programmes.
‘‘In the short to mediumterm, focus will remain on the major projects under way in Auckland and Adelaide,’’ she said.
‘‘The extent of the longterm prize from investment will remain uncertain until each is complete, with SkyCity looking to capitalise on expected higher visitation and better access/car parking. However, a material uplift in earnings is required to meet the company’s return hurdles/targets.
‘‘We see the risk/reward as evenly balanced.’’
SkyCity said yesterday it expected ‘‘modest growth’’ in earnings in the current financial year, implying a 3%to4% lift in ebitda driven by higher earnings from its international highroller business and its flagship Auckland casino. — BusinessDesk