SkyCity/SKC

Sky is one we are interested in. Quality gaming and leisure assets in New Zealand, seemingly better operated, given earnings and margins.

We’ve made money in the past from owning Crown on valuation grounds (then sold into the takeover); the underlying stocks are quite volatile at present, given relentless regulatory pressures.

They are cheap, however, cheap for that very reason (the attempts to snuff out problem gambling and attempts to improve the corporate/operational governance of casino operators around AML, amongst other things).

The CEO resigned back in October…

…and guidance from the 27th of October lasted for roughly 6 weeks or so.

A modest downgrade perhaps, and lots of moving parts to it (e.g. the carpark, legal issues with Adelaide, lurking in the background and the Auckland license issue), but it is fair to say the share price weakness will continue.

It is amazing how gaming has also been vulnerable to macro pressures this year (normally it is considered somewhat defensive; in our view it is more due to increased competition from online gaming/gambling/sports-betting, and thus less “in person off to the casino” betting).

Value is there, but not for the faint hearted (it is a very well held stock in the more absolute return or value oriented strategies, given the high risk high reward nature) and for the more conservative, waiting until the outcome on the NZ licence suspension issue is resolved, perhaps similarly so for Adelaide, may probably be the most prudent strategy.

Important Information: This document has been prepared by Aequitas Investment Partners ABN 92 644 165 266 (“Aequitas”, “our”, “we”), a Corporate Authorised Representative (no. 1284389) of C2 Financial Services, (Australian Financial Services Licensee no. 502171), and is for distribution within Australia to wholesale clients and financial advisers only.

This document is based on information available at the time of publishing, information which we believe is correct and any opinions, conclusions or forecasts are reasonably held or made as at the time of its compilation, but no warranty is made as to its accuracy, reliability or completeness. To the extent permitted by law, neither Aequitas nor any of its affiliates accept liability to any person for loss or damage arising from the use of the information herein.

Please note that past performance is not a reliable indicator of future performance.

General Advice Warning: This document has been prepared without taking into account your objectives, financial situation or needs, and therefore you should consider its appropriateness, having regard to your objectives, financial situation and needs. Before making any decision about whether to acquire a financial product, you should obtain and read the relevant Product Disclosure Statement (PDS) or Investor Directed Portfolio Service Guide (IDPS Guide) and consider talking to a financial adviser.

Taxation warning: Any taxation considerations are general and based on present taxation laws and may be subject to change. Aequitas is not a registered tax (financial) adviser under the Tax Agent Services Act 2009 and investors should seek tax advice from a registered tax agent or a registered tax (financial) adviser if they intend to rely on this information to satisfy the liabilities or obligations or claim entitlements that arise, or could arise, under a taxation law.