SkyCity Entertainment’s Financial Outlook Improves

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SkyCity Entertainment Group’s revised financial outlook has improved from negative to stable in the latest update issued by credit rating agency S&P Global Ratings.

Inside Asian Gaming reports that the agency said SKyCity’s “earnings recovery is progressing quicker than we anticipated”, adding that rising revenues and falling capital expenditure requirements over the next few years will see its adjusted debt-to-EBITDA ratio remain below 3x by the end of fiscal 2021.

“We anticipate earnings in the fiscal year ending June 30, 2021, will recover to at least 75 per cent of fiscal 2019 levels, and approach near normalised levels in fiscal 2022,” S&P said.

“According to our forecasts, EBITDA in fiscal 2021 will exceed fiscal 2020 levels, resulting in an S&P Global Ratings-adjusted debt-to-EBITDA ratio of under 3x, and further falling to the mid-2x range over fiscals 2022 and 2023.

“The improvement will likely be supported by the strong recovery in gaming and non-gaming revenue, primarily at the company’s Auckland and Adelaide assets.”

While work on SkyCity’s New Zealand International Convention Centre and Horizon Hotel in Auckland is ongoing, the company recently completed its A$330 million redevelopments of SkyCity Adelaide.

As a result, S&P noted that the group’s capex peak has likely passed, with only NZ$119 million spent in the first half of fiscal 2021, compared with NZ$202 million in the first half of 202.

That leaves around another NZ$160 million to be spent on the New Zealand International Convention Centre which “we expect to be spread over the next few years,” according to the rating agency.

“The stable outlook reflects our view that SkyCity will maintain its solid earnings recovery through the COVID-19 recovery phase over the next two years and that the company will appropriately manage its remaining development activity in Auckland within our rating tolerances,” it added.

SkyCity announced in mid-April that it had permanently ceased all dealings with junket operators and would instead bring its VIP operations in-house following a recent strategic review into its International Business Division.

SkyCity bans junkets immediately

New Zealand-headquartered SkyCity Entertainment has vowed to permanently cease all dealings with junket operators at its casinos in Australia and New Zealand.

Asgam reported in mid-April that the decision to bring SkyCity’s international VIP operations in-house was made following the conclusion of a strategic review into the company’s International Business division.

The ban, effective immediately, follows the decision by Crown Resorts to suspend its junket operations, shortly before the release of a report into the suitability of the operator to hold a casino licence in New South Wales.

In an ASX announcement on Tuesday morning, SkyCity said it has determined to permanently cease dealing with all junket operators and will instead operate its International Business under a revised operating model.

That model will see SkyCity “deal directly with International Business patrons after appropriate Know Your Customer and customer due diligence requirements are satisfied.”

The company added that it will consult with relevant gaming regulators in New Zealand, where it operates casinos in Auckland, Hamilton and Wellington and in Australia, where it recently completed a A$330 million upgrade of SkyCity Adelaide.

Crown Resorts has already announced a similar ban on working with junket operators, while regulators in WA, home to Crown Perth, have implemented a junket ban of their own.

The Bergin Report recommended junkets also be banned in New South Wales, although local authorities have yet to act on any such measures.

William Brown

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