SKC/Sky City NZ

Sky City (big NZ casino and hotel operator, with some operations in Aus) out with a trading update.

Grim across the board, it would seem, firstly, FY24 is a small downgrade, not so bad perhaps, but clearly not great given that they’d already downgraded at the back end of ’23…

…and then the FY25 guidance, adjusted for the one-off, only gets you to $300m at the upper end of the range; consensus was for ~$330m!

So a pretty clear deterioration in the outlook regardless of the building issues/delays/regulatory issues.

Then you get to the dividend, where the news is the 2H24 dividend is scrapped, as is the FY25 dividend, to get them through the various penalties, fines, and possible construction blow outs, without endangering the balance sheet.

Now, scrapping the dividend is absolutely the right thing to do, if the wheels are flying off. All else matters less. But it means a stock that was starting to look quite compelling (as the AusTrack settlements were behind them, the carpark litigation was behind them) given a very cheap valuation, for some very good assets, is assuredly on the backburner for now.

We’ve often said “not one for the faint of heart” and certainly not for our flagship core equity approach, but it is one our managers have tended to hold, and we’ll feel some indirect pain there (typically a 2-3% position for several of our active managers).

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