SKC - Sky City

[Snoopy]

Glad to hear you've done well, Snoopy. My own small holding of SKC has been a bit of a disaster. Being my first stock purchase (before the GFC) I've watched it's value slowly slip away on account of it's small size (making selling a difficult decision given commission's relative size) and my lack of experience.

You didn't take advantage of the 2009 shareholder top up opportunity then, where no matter how many shares you held you sent in some money and they issued you some shares at $2.61? As Charlie Brown would say Arrrrgh!

The SP seems to just be tracking sideways - what's your take on it at present? Worth holding?

I am expecting an earnings boost from the World Cup and the Australian operations to keep getting better. Even tracking sideways, you are getting a gross yield of 6.8%. Compare that with what you get at the bank. Looks like a solid hold from where I sit.

SNOOPY

[Dworsf01]

I took part in the top-up, which is the only reason my holding isn't depressingly red. I certainly regret not purchasing more at that price. What you say re: dividends rings true, fortunately for me selling isn't really an option anyway.

[Snow Leopard]

How well have I done out of SKC? I have been a shareholder since the BIL sell out a long 11 years ago. However the median holding time for my holding is just 4 years and 2 months. In those 4.167 years I have received a total of 54.9cps in dividends. A ‘buy and hold’ investor buying at that time would have paid $4.40 per share. My average purchase price is $2.60. So purchase timing, has been brilliant.

My total return has been (2.60) (i^ 4.1667)= (3.16+0.549), where ‘i’ works out at 1.089. This represents a compounding gain of 8.9% per year.

Over that same time period the NZX50 has declined from 4000 to 3300. That represents a loss of:

4000(f^4.1667)=3300, where ‘f’ works out as 0.955.

This represents a compounding loss of 4.5% per annum. My net gain relative to the NZX50 index is therefore 13.4% per year compounding and after tax.

SNOOP

Great though that is I still fail to understand the attraction of shares like Sky City, and the second post on this thread is me saying so.

Now I first posted about Mainfreight and claimed to be a holder on 11-Aug-2004. On that day the close was $2.00 if you had simply kept those shares then at todays close of $6.57 and calling today six years later (actually less) your annual compound growth for capital gains alone is 22%. Add in the regular dividend as well and it gets better.

Buying shares with a good yield but poor growth prospects is not the best way to make money.

However I will state that I consider that Mainfreight is currently overpriced.

regards
Paper Tiger

Disc: Own MFT; Do not own SKC.

[Snoopy]

Buying shares with a good yield but poor growth prospects is not the best way to make money.

SKC is trading on an historic PE (based on FY2009) of 15. A PE of 15 means either quite good growth prospects, or a rather secure cashflow with lesser growth prospects.

SNOOPY

[Snoopy]

Now I first posted about Mainfreight and claimed to be a holder on 11-Aug-2004.

The growth of Mainfreight, as I understand it, is based on growing the size of the business by looking for new business relationships based around Mainfreight's core competancies. SKC is now more about working smarter with existing assets and customers. I would argue there is less implementation risk in the SKC strategy verses the MFT strategy. Perhaps the MFT strategy has been 'better', and your results PT would certainly indicate that. But after 5 or so years of consolidation, I would argue that from here SKC growth prospects for FY2012 look very good indeed. I had thought of the Rugby World Cup as a slightly bigger Lion's tour. But it is going to be 5 to 10 times as big. And I think a large chunk of that windfall tourist growth will go to SKC.

SNOOPY

[ratkin]

Sky city a good stock tpo include in a core portfolio of NZ stocks . Low risk , decent dividends and long term growth / takeover prospects

[buns]

Are holders getting a tad fustrated with this one?

Seems while the rest of the NZX recovered quite nicely post the 2nd dip from the recession, SKC never moved. It's trading in the range it did when things were bad bad this time last year when they were in debt trouble, which has now vanished.

The fundamentals have not changed - they have got a large bid going in auckland, and have stated they are actively looking for growth in Aussie.

Just come off the back of a double digit profit rise, and expecting more to come in FY11, a divy over 8.5%

Time to accumulate on this weakness I think

[ratkin]

Patience grasshopper, just keep collecting the diviedends. The sharre price will rise eventually

[buns]

I don't hold, it's just one I'm watching and waiting to enter some time soon.

I've just been wondering if I'm missing something here, as I would expect this to be in the mid 3.50's or at a similar level to where the other NZX 15 stocks moved back to these past few months.

I think SKC will lose the convention centre bid, and hoping the SP will drop again after this, for my entry.

[Snoopy]

Patience grasshopper, just keep collecting the dividends. The share price will rise eventually

This has been my strategy with Sky City, although I have been reinvesting those dividends in the DRP, plus I participated in the 2009 mid year capital raising.

Attachment 3080

The investment performance of SKC was quite good up until the global financial crisis took hold, at which point the share price started to deteriorate. I should add that this share price chart shows the 'adjusted' share price to take account of the capital raising. The capital raising was what I call the new 'soft' type where the company doesn't have to issue a prospectus provided they seek no more than a certain amount ($5,000 IIRC) from each shareholder, in this instance at $2.61 per share. It is very hard to model this dilution as different shareholders will benefit in reverse proportion to the size of their before issue shareholding. Some of the medium sized shareholders (like me) will inevitably end up being diluted by such a scheme.

In any event, there was some share price weakness immediately after the issue as so called long term investors immediately sold out once they recognised there were minimal stag profits to be made. I was able to take advantage of this and buy more shares on market at very close to the issue price. These purchases mean that looking into my five year performance review window may average holding time for my incremental investment has been one year and three months. The pink line shows my average purchase price.

Readers will see that initially my average purchase price is at a significant discount to average market trend price. However, over subsequent months the share price deteriorated. At the end of my review period (30-09-2010) my average top up purchase price was only just above the market closing price.

Inevitably when a share price declines over a period you cannot be happy with that investment performance. However, the extra capital that I invested in SKC did not decline over the five year period, and only having that capital invested for 15 months of that five year period was a contributing factor.

SNOOPY