SkyCity still a ‘buy’, but analyst trims expectations
SkyCity’s fire-ravaged International Convention Centre won’t be open until June 2022 — 18 months beyond its scheduled opening and well after it is meant to be hosting Apec, one analyst is forecasting.
The centre had been expected to open late next year.
But Craigs Investment Partners analyst Wade Gardiner has hosed down earnings expectations for the casino operator, based on the assumption that the opening will be delayed by 18 months and SkyCity’s new hotel will also open six months later in June 2021.
The Apec Leaders’ Week is scheduled for November 2021, with Apec-related events beforehand.
Gardiner said forecasting the fire’s impact was a “moving target” with changes likely as more information became available on construction timing, insurance, costs to SkyCity and indirect impacts such as occupancy levels.
“Management appears confident that insurance arrangements are in place for the reconstruction of the development, but at this point we are unsure as to the revised time-frame for the development to be completed, and the extent to which insurance will cover business interruption.”
Gardiner has reduced his expected earnings before interest, tax, depreciation and amortisation (ebitda) for SkyCity by 2-7 per cent for its financial years ending 2021, 2022 and 2023.
But he estimates the fire will only a very slight impact in SkyCity’s current financial year, with ebitda down from about $303.6m to $301.1m.
Despite the uncertainty, Gardiner has retained his “buy” rating on the stock with an assumption that insurance proceeds would fully cover the reconstruction, and believes dividends will not be affected by the fire.