Short-Term Headwinds for SkyCity; No Change to Our Fair Value Estimate

SkyCity's underlying net profit after tax, or NPAT, for fiscal 2014 of NZD 123.2 million was below our forecast of NZD 127.6 million. This reflects softer-than-expected results from all properties except the flagship Auckland business which was strong. We underestimated the disruptions in Adelaide caused by the current renovation work. We expect gaming revenue to be soft in Adelaide in fiscal 2015 as the first half is likely to see further disruption. Moreover, SkyCity is likely to ramp up marketing initiatives (justifiably so) to woo interstate players to Adelaide, lifting costs in the near term. The Auckland gaming business is also unlikely to see any material revenue and earnings improvement from additional gaming machines in 2015 as those products will be available only towards the end of 2016. Given these headwinds and soft conditions in Darwin and Hamilton, we anticipate a 4% to 5% cut to our current fiscal 2015 NPAT forecast of NZD 132.3 million.