Will the ‘emperor’ return to the JSE?

Though punters are holding off any big bets on the JSE’s casino sector, a persistent question remains around whether Peermont Global, SA’s third-largest casino group, will make a return to the JSE. Peermont, which is anchored by its popular Emperors Palace casino in Johannesburg, was listed on the JSE in 2004 but delisted in 2007 following a private equity buyout. Interestingly, in 2015 rival casino firm Sun International unsuccessfully pitched a R9.4bn offer to buy out Peermont. Officially, Peermont is diplomatically noncommittal. New CEO Nigel Atherton says it is difficult to publish Peermont’s intentions as a nonlisted entity. “But there may be considerations for the future — obviously our growth plans and market conditions need to be optimal,” he says. Peermont has been a surprisingly strong performer over the past few years despite not boasting the operational scope (or diversity) of larger rivals Sun International and Tsogo Sun. The writer had access only to abridged financial results — but these did confirm solid numbers for the year to end December 2016 with revenue up 3,9% to R3.56bn and similar Ebitda growth to R1.35bn. Peermont’s key property, Emperors Palace, was affected by marginal growth in the Gauteng gaming market and reported gross gaming revenue growth of 3.2%. Cash inflows from operating activities came in at close to R2bn, boosted by the R675m settlement from Sun International (stemming from Peermont withdrawing objections to the new Menlyn casino). Atherton says that though the SA gaming market started to soften in the second half of 2016, Peermont prided itself on industry-leading margins through continuous cost-base management and a strong customer focus. In financial 2016 Peermont managed to hold its Ebitda margin at an enviable 37%. Atherton points out that from 2011 to 2016 Peermont achieved compound Ebitda growth of nearly 6%. “The gaming industry is a leading indicator of the state of economic growth, and tracks GDP growth quite closely. As in the case of the 2008 downturn it is likely that, with the right sociopolitical stability and positive global economic sentiment, the gaming industry will return to winning ways.”