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Thread: Skyline

  1. #61
    ShareTrader Legend Beagle's Avatar
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    Quote Originally Posted by Beagle View Post
    EPS stripping out property revaluations was $1.49 which at $24 puts them on a PE of 16.1. Annual report contains strongly worded warning regarding potential for disruption during the lengthy construction phase of the expanded facility at Queenstown and warns profit for the next five years may not be the same as for the last five years, Ouch !
    THL currently trading on a historical PE of 18.5 at $4.45 but due to report shortly.
    I think once THL report they'll be back on a similar PE and taking into account the profit warning and intense capex for Skyline including the need for a new multi story car park (not costed but I assume this is additional to the $100M estimated capex which might have gone up even more again ?)
    The whole slow disclosure and sort of old boys network thing at Skyline and lack of being listed on the NZX which is frankly quite absurd for a company with a market cap of ~ $800m leaves me pretty cold now having pontificated over it for a while now. No idea how good the new CEO is, not much about him in the annual report...I suppose if you were one of the elite insiders you would have got a more thorough run-down on his credentials. Too much about how this company is run is opaque. No longer interested and PE isn't cheap considering the profit warning.
    http://www.unlisted.co.nz/uPublic/do...ort%202017.pdf
    THL's result out this morning and substantially upgraded guidance makes them look very cheap relative to Skyline, (most especially when you factor in the caution about Skyline's profit outlook but robust profit growth outlook at THL)
    No reason to follow Skyline any more for the foreseeable future, will watch from a distance and good luck to anyone holding.
    Ecclesiastes 11:2: Divide your portion to seven, or even to eight, for you do not know what misfortune may occur on the earth.
    Ben Graham - In the short run the market is a voting machine but in the long run the market is a weighing machine

  2. #62
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    I think you're pretty much right SKYLINE should be on a similar P/E multiple to THL. The greyness of unlisted, minimum holding etc offsets much of the benefit from SKYLINE's wide moats and international presence (well for me anyway).

    I wouldn't view the Queenstown execution being a key risk. Just like how the SKC AKL casino is getting disturbed due to the CRL, NZICC, etc, no doubt the Queenstown luge operations will be affected in the short-mid term due to their expansion but that's wheremost of the similarity ends. The Queenstown operation doesn't have the same sort revenue concentration as SKC AKL I think its like 30-40%. And the disturbance is going to directly increase long term revenues. I wonder if Skyline can lock in a fixed price contract from Fletchers for the work too.

    Waiting for lotto tonight to get a minimum shareholding.

  3. #63
    ShareTrader Legend Beagle's Avatar
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    LOL on the Fletchers comment...they'll never build it cheaper any other way Opps No, now the CEO has been fired and new projects need board approval maybe its well and truly north of $100m now !
    Ecclesiastes 11:2: Divide your portion to seven, or even to eight, for you do not know what misfortune may occur on the earth.
    Ben Graham - In the short run the market is a voting machine but in the long run the market is a weighing machine

  4. #64
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    Quote Originally Posted by ratkin View Post
    See in latest announcement there been a fall in the patronage of chch casino

    They need to stop blaming the earthquake. Reason they doing so poorly is because they ditched the all you can eat buffet.
    That along with free meals on birthdays bought the punters in the hundreds. Nearly everyone i speak to cites this as the main reson they no longer go to the casino
    Since the earthquake there been much less competition for the entertainment dollar , yet the casino has gone backwards,they have imo gone down the wrong path in the last couple of years.
    Bring back the buffet !!
    I see as at 31st March 2017 (the last reporting date) the Christchurch casino licence expires in 2.63 years (2 years and 8 months). That means the date of expiry of the casino licence is November 2019. There was a note in AR2017 about feverishly working on the renegotiation of the licence. But why are they going so close to the wire on what is a pivotal part of the SKE business? Competitor operator Sky City in Auckland tied up a new deal some five years before the old one expired. If the Christchurch City Council play hard ball, the terms of a new licence could be bad news for SKE. The original licence was granted for 20 years, so this is the first time the licence is up for renegotiation. Do I catch a sniff of naivety in the Casino licence renewal process from an SKE perspective?

    SNOOPY
    Last edited by Snoopy; 16-11-2017 at 03:05 PM.
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  5. #65
    ShareTrader Legend Beagle's Avatar
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    Beagle's are renowned for their ability to sniff out trouble coming from a long distance away so your snout could be detecting a problem in the making but this hound reckons the board are stupid not to list this on the NZX...extra liquidity would command a PE premium to what it trades on now. Old boys network can't be bothered with the extra disclosure and reporting requirements actually disadvantaging existing shareholders ?
    Ecclesiastes 11:2: Divide your portion to seven, or even to eight, for you do not know what misfortune may occur on the earth.
    Ben Graham - In the short run the market is a voting machine but in the long run the market is a weighing machine

  6. #66
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    Quote Originally Posted by Beagle View Post
    Beagle's are renowned for their ability to sniff out trouble coming from a long distance away so your snout could be detecting a problem in the making but this hound reckons the board are stupid not to list this on the NZX...extra liquidity would command a PE premium to what it trades on now. Old boys network can't be bothered with the extra disclosure and reporting requirements actually disadvantaging existing shareholders ?
    I don't think there would be many SKE shareholders given the underlying business and actual share price growth to add to their juicy dividends that would see themselves as disadvantaged. However I do agree that the minimum 4000 shareholding for 'outsiders' (at $24.50 as last traded, that translates to a minimum investment of nearly $100k) would make most 'Mom and Dad' investors balk!

    SKE have been strengthening their balance sheet with 'thin air capital' derived from their property investment portfolio over the years. p41 of AR2017 shows that the yield used to value the downtown Queenstown properties has dropped to a range of 4.07% to 4.69%. Can such yields really be sustained if interest rates in general start rising? Might some of that 'thin air capital' disappear to where it came from if the tide on interest rates turns?

    SNOOPY
    Last edited by Snoopy; 19-11-2017 at 10:42 PM.
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    Have to respect that it is Queenstown CBD, recent sales for Queesntown prime CBD is 4-5%. High population+tourism growth, limited/no supply. My view is that a change in these factors would have more influence than interest rates - which have a steady outlook for the next few years. It sucks that they don't do any sensitising on the cap/yield rates in their risk management note.
    Excluding property fair value movement, the business is still growing its revenue/profits/cash generation. Retaining their growing earnings has been the main way that they have strengthened their balance sheet.
    ... perhaps one thing to consider is whether the property is "prime" and if not, how much capex to get it to "prime".

    And agreed, the minimum shareholding of 4,000 makes me more sad than NZ's poor tourism infrastructure.

    Anyone hazard a guess to how much money SKYLINE will make of the forest they are cutting down? #wallofwood

  8. #68
    ShareTrader Legend Beagle's Avatar
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    Had lunch at Sky City's excellent Fortuna buffet today, almost as good as the buffet at the top of the gondala where Mr and Mrs hound "celebrated" Mr hounds aging process last year but I got to looking across at the giant convention center construct right opposite and pondering, (as you do between glutinous courses of endless food). If this convention center construction blowout went from low $400m to low $600m and Fletchers are widely rumored to be losing ~ $200m on that project one wonders if Skyline's $100m gondola redevelopment might blow out by a similar percentage ?
    Add in the fact that the council have forced them to build a multi story carpark as par t of the Environment hearing and could we see the real cost of that redevelopment close to $200m ?
    One wonders how are they going to fund that ? In their last annual report they warned of significant business interruption during the redevelopment phase too.
    Business interruption and getting a return on all that extra capex and funding all that capex = interesting times ahead in my opinion.
    Disc: Too nervous in the circumstances to give them $100 Kilos of my investment freight.
    Ecclesiastes 11:2: Divide your portion to seven, or even to eight, for you do not know what misfortune may occur on the earth.
    Ben Graham - In the short run the market is a voting machine but in the long run the market is a weighing machine

  9. #69
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    Quote Originally Posted by Beagle View Post
    Had lunch at Sky City's excellent Fortuna buffet today, almost as good as the buffet at the top of the gondola where Mr and Mrs hound "celebrated" Mr hounds aging process last year but I got to looking across at the giant convention center construct right opposite and pondering, (as you do between glutinous courses of endless food).
    Beagle, I am glad that your dining experience has contributed to the dividend of my SKC shares being less sinful. Although, after rereading the glutinous bit, it sounds like the Beagle snout licked the dish dry, with little if any profit left for we poor shareholders who dished it up! So maybe I should be thanking Mrs Beagle?

    If this convention center construction blowout went from low $400m to low $600m and Fletchers are widely rumored to be losing ~ $200m on that project one wonders if Skyline's $100m gondola redevelopment might blow out by a similar percentage ?
    Add in the fact that the council have forced them to build a multi story carpark as par t of the Environment hearing and could we see the real cost of that redevelopment close to $200m ?
    One wonders how are they going to fund that ?
    A really good question that I have been contemplating as well.

    Section 5.1 of AR2017 outlines Skyline's EOFY2017 borrowings:

    ------------

    Secured Bank Loans

    m
    Short Term Loans $18.000
    Long Term Loans $10.000
    Total Term Loans $28.000

    ------------

    SKE has had its balance sheet greatly strengthened by property gains in the past. But I wouldn't bank on any more windfall gains like this going forwards. So if we normalise the FY2017 profit by taking these gains (amongst other possibly unrepeatable gains) out, this is how I see the year FY2017 just past has stacked up:

    m
    Net Profit Before Tax and Finance Costs $85.941
    less Investment Property Revaluation $20.255
    less Insurance Proceeds Received $1.962
    less Foreign Currency Translation Gains $0.068
    less Net Finance Cost $0.941
    less Total Tax Expense $17.568
    add Share of Profit from Equity Accounted Associates $0.672
    equals Underlying Net Profit After Tax $45.799

    Now let's say the cost of the gondola redevelopment blows out to $200m, so total bank debt becomes $228m

    My measure of a company's ability to repay debt is the MDRT (Minimum Debt Repayment Time), calculated by taking the underlying bank debt and dividing by this year's profit:

    $228m / $45.799 = 5 years

    This is what I would call a 'medium' debt load (2-5 year repayment time is medium), and well sustainable by the kind of profits that SKE are currently generating from their high quality 'moat protected' assets. Of course the new gondola should theoretically double the profits from the Queenstown Gondola operation in the end. So my MDRT assessment, assuming no profit growth, looks a little conservative.

    So the answer to teh question 'how to fund all this?' looks easy Beagle. Just ask a bank for a loan!

    In their last annual report they warned of significant business interruption during the redevelopment phase too.
    Business interruption and getting a return on all that extra capex and funding all that capex = interesting times ahead in my opinion.
    I think there won't be an issue with scaling up the core asset of this organization in the end. Profits will look better than cashflow as the all the construction costs are capitalised. I would think the hotel assets in Dunedin and Queenstown could be readily sold if SKE wanted more cash on the books. I do agree there is uncertainty here though. I wonder how much CCC will seek to renew the Christchurch Casino Licence? How much capital will SKE need to stump up to further their luge operations overseas?

    Disc: Too nervous in the circumstances to give them $100 Kilos of my investment freight.
    I agree that committing $100k is a step too far for the average share punter. But maybe if Skyline stumbles over the next year or two, the entry price for that minimum 4000 share holding might be a little less?

    SNOOPY

    discl: sniffing, not holding.
    Last edited by Snoopy; 25-11-2017 at 11:53 AM.
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  10. #70
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    Quote Originally Posted by Out to lunch View Post
    Have to respect that it is Queenstown CBD, recent sales for Queesntown prime CBD is 4-5%. High population+tourism growth, limited/no supply. My view is that a change in these factors would have more influence than interest rates - which have a steady outlook for the next few years.
    Yes downtown Queenstown is pretty small if the truth be told. In AR2017 note 5.1a I see that term debt has been negotiated down to 3.99%. The capitalised interest rates used for valuation are 4.07 % to 4.69% (AR2017 note 3.3). So even at those very low capitalised valuation rates SKE can still borrow and make a cash profit on their investment property - amazing!

    It sucks that they don't do any sensitising on the cap/yield rates in their risk management note.
    The balance sheet looks pretty strong, with only $28m of bank debt backed by $371m of shareholder equity. Maybe management don't see it as an issue?

    Excluding property fair value movement, the business is still growing its revenue/profits/cash generation. Retaining their growing earnings has been the main way that they have strengthened their balance sheet.
    Retaining profits has certainly worked in the past to fund the business. Retaining $100m out of $45m profit to fund the redevelopment of the Queenstown Gondola is an equation that doesn't work. But it looks like SKE should have plenty of borrowing capacity left on the existing balance sheet to fund this kind of expenditure. But will the existing shareholders be comfortable with these higher debt levels?

    ... perhaps one thing to consider is whether the property is "prime" and if not, how much capex to get it to "prime".
    You are referring to the proposed redevelopment of the downtown Queenstown shopping mall (O’Connell’s Pavilion) owned by Skyline? Reading the annual report, it looks like the spending on the contract run 'Eichardt’s Hotel' on the lakefront and the adjacent ‘New Eichardt’s Building’ has been done.

    SNOOPY
    Last edited by Snoopy; 26-11-2017 at 12:35 PM.
    Watch out for the most persistent and dangerous version of Covid-19: B.S.24/7

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