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No short-term gain seen from SkyCity as analysts downgrade to sell

The rating on SkyCity Entertainment Group’s shares has been downgraded from hold to sell by analysts from Deutsche Bank and Craigs Investment Partners, reflecting doubt over whether the shares can offer a return.

The analysts cite the $1 billion required for the company’s Adelaide business and planned NZ International Convention Centre in Auckland as a risk.

"With SkyCity now offering nil 12-month total return potential on our valuation framework we downgrade our rating to sell (from hold)," Craigs’ lead research analyst Adrian Allbon and Deutsche Bank’s Mark Wilson said in a joint note.

"With SkyCity entering the execution phase of deploying a large amount of capital and fully loading its balance sheet with debt over FY16-18 to create a subsequent step increase in earnings from its two key properties Auckland and Adelaide, investors deserve some valuation margin of safety given the asymmetry of near term risk vs. longer term reward."

A spokeswoman for SkyCity declined to comment to local media on the downgrade.

"We never comment on analysts' views on our stock.”

SkyCity will announce the results of its operations for the six-month period ending 31 December 2014 next Wednesday.


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