I've been following Sky City for many years, exited about five years ago but now slowly buying back in.
Despite the threat of ongoing legal action by AUSTRAC’s Regulatory Operations Team concerning serious non-compliance by SkyCity Adelaide Pty Limited, the stock looks to be reasonable value. The Auckland casino is the jewel in the crown, especially with the Horizon hotel complex to be completed in 2024 and the International Convention Centre to be completed in 2025.
Revenue has increased with H12023 at $463M (+59.6%) and EBITDA at $106M (+421%). Annualised revenue looks like moving from $590M to $876M in 2023 and $941M in 2023.
Auckland accounts for 58% of revenue. The elephant in the room is the ongoing Adelaide case, where AUSTRAC allege that the casino laundered cash for a number of individuals. Adelaide accounts for 28% of revenue but only 13% of EBITDA. One broker suggests a fine of around $50M which will hurt short term profit, but looks survivable.
Post Covid, Sky City is again paying a dividend at around 5.2%.
SKC Price at posting:
$2.15 Sentiment: Buy Disclosure: Held
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