re: guided profit forecast for 2004 GUIDED PROFIT FORECAST FOR...

re: guided profit forecast for 2004 GUIDED PROFIT FORECAST FOR 2004 FINANCIAL YEAR.

1.Introduction:
On 16 April 2003, I predicted $111 mill. but dropped that to $108 mill (28 July 2003). The actual result was close ($107.2 mill).

This year, we need to take account of additional interest payments on Capital Expenditure and the expected heavy flow of passengers arriving at the Auckland Airport.

Also incorporating the usual increase in profit due to a greater residential population and savings in costs. Building of departments close to the Casino is proceeding at a fast pace (Bongo).

2. Capital Expenditure.
2.1 Main Expenditure.
The following total main capital expenditure has been set down. Not included is a possible small overrun in cost building the 5 star hotel:

$65 mill. Conference Centre Building started in Oct. 2002 and completes in April 2004. Allow $ 35 expenditure in the current year.
$75 mill. Hotel to start in May 2004 and to complete a year after. Allow $13 in this year.

$25 mill Gaming complex in the old Conference room. Start April 2003, completion Dec 2003. Allow $17mil. this year.
Hamilton extensions $ 8 mill.
Adelaide: A possible $70 mill expansion with $20 mill. to spent in Jan - Dec 2004. Allow $10 in this year.

Total amounts to about $243 mill to spent over the next 3 years ($50 mill. is optional at Adelaide); to spend this year $83 mill. Interest at 7.7% or $ 4.3 mill after tax; make it $4.5 mill.

While the extension of the gaming facilities results in a total of 1647 machines, there is the loss of the use of that floor for conferencing to consider.

SKC will use the new Conference building in April, I consider that preparation, opening and normal costs running this facility in the remaining 2 months of this year will just about equal that of income.

However, there wil be income from Conference delegates using the SKC's gaming, restaurants, hotel and tower facilities.

2.2 Minor Capital Expenditure.
There is an ongoing expenditure in the present Hotel (to be completed in 2003/2004), a refreshment of the Sky tower entry and some additional non-routine cost inside the Main Building.

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3. Guided profit projections.
Previous year's increase in profit to $107.2 mill. (Up 26%) may not be sustained due to heavy expenditure and resulting Interest costs.

Adelaide ought to be a good performer again as EBIT was up 48% at $15.02 mill. SSL ought to perform due to blockbuster movies. Smoking legislation won't come into effect till Dec. 2004.

Taking the above mentioned factors into account, I'll go for a guided forecast of about $127 mill (+18.5%).

4. Calculation of E/S, P/E and Dividends.
Shares: 415 mill. There was a 2 for 1 on Nov 15, 2003 and this gives us an average of some 329 mill issued shares during the year. The prospective P/E will be calculated using 415 mill shares and E/S of 30.6 cents to give 15.0 based on a share price of $4.60.

Dividends: Last year an extra 20 cents div was paid. Deduct that from the total payment of 67 cents leaving 47 cents. The E/S then were about 51 cents, leaving a payout of some 92%. In 2002, the payout was 66%.

The exact div. payout can therefore not be ascertained but we can adopt say a 92% payout again and weight it with their respective number of shares for each 6 months. An 92% payout of the NPAT of $127 mill. will give us $116.8 mill against a payout of just over $94 mill. last year (or div of 56 cents against 47 cents last year based on last year's 208 mill shares).

On that basis, the Interim div is 28 cents (on 208 mill. shares) and the final 14 cents on 415 mill. shares); total payout amounts to $116.8 mill.-See above. Based on the current 415 mill shares and the payout of $116.8 mill., the div. wil be 28.1 cents, the yield 6.1% or the fully imputed yield 9.15%.

5. Summary of prospective guided numbers. (Current price: $4.60)
Profit: $127 mill.
P/E: 15.0
Div: yield 6.1% and fully imputed: 9.15%

6. Intentions.
This site will be revisited after the Interim Announcement and in early June when we hope to know more about the impact of the Conference Centre on the Main Complex.

That is my opinion,

Gerry Stolwyk
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