SKC - Sky City

[Snoopy]

Hello from Adelaide :-)

I am over here checking out Sky City's problem child. Saturday night and the gaming tables seemed largely full, with the slot machines probably around 75% ultilised. It wasn't a bad night so no excuse for the facilities not to be well used. The restaurants certainly were and doing a good trade around 9pm.

Friday the previous night was much quieter. Pokie machine utilisation only 50%. The smoking lounge was not that well used so perhaps the smoking ban is having an effect?

SNOOPY

[BRICKS]

Hello from Adelaide :-)

I am over here checking out Sky City's problem child. Saturday night and the gaming tables seemed largely full, with the slot machines probably around 75% ultilised. It wasn't a bad night so no exscuse for the facilities not to be well used. The restaurants ceratinly were and doing a good trade around 9pm.

Friday the previous night was much quieter. Pokie machine utilisation only 50%. The smoking lounge was not that well used so perhaps the smoking ban is having an effect?

SNOOPY

GOOD work Snoopy enjoy yourself but tell us would you invest more at current prices, So try a gamble and let us KNOW.. GOOD LUCK..

[Snoopy]

GOOD work Snoopy enjoy yourself but tell us would you invest more at current prices, So try a gamble and let us KNOW.. GOOD LUCK..

Well Bricks, almost a year has gone by since you made that comment. Since that time I have been steadily increasing my investment in SKC to the extent that I have nearly doubled the number of shares that I own. You picked a bottom of $2.90ish. Well, if managment had not gone ahead with that capital raising earlier in the year you might have been right.

I can't say that my investments in SKC over the last year, or the last three years for that matter, are looking good. The shares I have been issued in lieu of dividends may have been 'tax effective'. But I am well underwater on those dividend entry prices overall (I have 'bought' shares at $5.36, $4.78, $4.53, $4.36, $3.85 and $3.60 since April 2006). My only saving grace are the shares that I bought under the dividend plan at $2.52 earlier this year.

Likewise my 'on market' purchases over the last twelve months at $3.06, $3.23 and $2.90 are all under water too. I managed to snaffle up some more shares under the shareholder top up offer in May at the institutional capital raising price of $2.61. But like everyone else I had my application to buy scaled back. I rectified that late last week by picking up some shares at $2.59 as the market dipped below the top up offer price. Today the share has been trading around $2.62. That is a long way from the $5.50 plus when former CEO Evan Davies responded to any drop in share price with a public news release saying that Sky City was ripe for takeover. I don't think anyone would believe that takeover hype today. But the hot air that has come out of the share price since, has made SKC -I think- an outstanding investment prospect today.

The queues outside of the Lotto shops when 'Big Wednesday' jackpotted a couple of weeks ago brought home to me that the kiwi gamblers instinct is still alive and well, even in these times of recession. I don't see a 'crow about' result coming from SKC this year, despite the encouraging signs from both the Adelaide and Darwin investments. Even next year (FY2010) I would be surprised if the result is any better than 'steady as she goes'. Looking further out than that though I think many investors will be cursing themselves that they didn't stock up on SKC shares at around $2.60 in the middle of 2009 when they had the chance. Even at a reduced annual dividend rate of 18cps that still gives a gross dividend yield of 10% with the promise of better to come. It is investments like SKC that prove that for the long term investor, you don't have to buy and sell to do well.

SNOOPY

discl: hold SKC, average entry price $2.60

[kizame]

SKC is currently in a steep downtrend with OBV also declining steeply.
Good that you are long term,but there are actually stocks trending upwards at the moment,not many,but they are there.

[Snoopy]

SKC is currently in a steep downtrend with OBV also declining steeply.
Good that you are long term,but there are actually stocks trending upwards at the moment,not many,but they are there.

Could the OBV be declining steeply because those 'weak holders' who got their shares cheaply in the recent share issue:

1/ have now 'sold out'? -OR-
2/ are no longer able to sell out at a profit?

Just because a share price is trending down kizame, that does not mean it will continue to go down (if that company is making a profit). At some point the downtrend will end. If the share is cheap enough I often buy at or near historic 'support' points. Particularly if that support point co-incides with a significant dividend yield figure, like a gross yield of 10% (based on an estimated annual dividend of 18cps and a share price of $2.60). That kind of SKC return is double what you will get from a bank term deposit these days.

SNOOPY

[kizame]

Could the OBV be declining steeply because those 'weak holders' who got their shares cheaply in the recent share issue:

1/ have now 'sold out'? -OR-
2/ are no longer able to sell out at a profit?

Just because a share price is trending down kizame, that does not mean it will continue to go down (if that company is making a profit). At some point the downtrend will end. If the share is cheap enough I often buy at or near historic 'support' points. Particularly if that support point co-incides with a significant dividend yield figure, like a gross yield of 10% (based on an estimated annual dividend of 18cps and a share price of $2.60). That kind of SKC return is double what you will get from a bank term deposit these days.

SNOOPY

Hi Snoopy, as regard to OBV trending down,I would say it would be a combination of both 1 and 2,and maybe 3, that the market is giving this stock a higher risk rating due to the downturn; but regardless of why it is happening,it still is,and in my experience,even though you are with a so called blue chip stock,you just don't know what could happen in this current very uncertain market. I have been caught out in the past,not by averaging down but by holding a downtrending so-called quality stock only to be left with an aweful lot less that I started with.
I currently hold Nuplex which i will dump as soon as it hits my stop loss,I don't care what dividend they pay,but am determined to preserve and grow capital.
The fact you mention support points,lends me to thinking that you do follow some TA,so if that's the case(and I am presuming here)why not wait till you see the stock start a new confirmed uptrend,the best of both worlds,and your divi yield overall will be greater,having purchased all the shares at the cheaper price.Sorry but school of hard knocks has taught me well.

Regards.

[Snoopy]

Hi Snoopy, as regard to OBV trending down, I would say it would be a combination of both 1 and 2,and maybe 3, that the market is giving this stock a higher risk rating due to the downturn;

Well if that is the case, I am willing to bet against the market. During a downturn it is the gold level treats that get hit the worst. The bronze level bonuses, the chocolate bar and the odd flutter, are not so easily given up and often used as palliatives for not being able to afford that big cash splash.

but regardless of why it is happening,it still is,and in my experience,even though you are with a so called blue chip stock,you just don't know what could happen in this current very uncertain market.

Oh I don't *know* what is going to happen in this uncertain market, that is something I fully acknowledge Kizame. But long term SKC are the succesful bidders for the only casino licence in Auckland, and hold the only casino licence in South Australia and in the Northern Territory. So long term, in 8-10 years I am absolutely as certain as I can be that Sky City will still be a leading casino operator. The long term future is IMO nowhere near as uncertain as you think it might be Kizame. And as for the short term future, well if you can afford to hold through the short term uncertainty, enjoying those fat dividend cheques along the way of course, then who cares?

The fact you mention support points, lends me to thinking that you do follow some TA, so if that's the case (and I am presuming here) why not wait till you see the stock start a new confirmed uptrend,the best of both worlds,and your divi yield overall will be greater,having purchased all the shares at the cheaper price. Sorry but school of hard knocks has taught me well.

TA practitioners don't tend to worry about the 'whys' of support points. But these high dividend paying shares do compete with term deposits as a source of income. So IMO the gross dividend yield *is* a highly important figure. Generally I would expect a high quality income earning share like SKC to trade at a couple of yield points above the six month and twelve month bank term deposits. SKC is trading at more than *four* yield points higher than the bank deposit rates. That means there is a pretty big margin of safety in the SKC share price verses term deposits. And that logic applies whether the SKC share price is trending either upwards or downwards.

However, I do agree that as the SKC is liquidity is good, perhaps I could enhance my returns on SKC by using TA. And maybe I yet will! I am thinking of my purchases of SKC over the last year as more of an 'insurance policy', than trying to time my buying point to precision.

SNOOPY

[Snoopy]

Hello from Adelaide :-)

I am over here checking out Sky City's problem child. Saturday night and the gaming tables seemed largely full, with the slot machines probably around 75% ultilised. It wasn't a bad night so no excuse for the facilities not to be well used. The restaurants certainly were and doing a good trade around 9pm.

Friday the previous night was much quieter. Pokie machine utilisation only 50%. The smoking lounge was not that well used so perhaps the smoking ban is having an effect?

Just to add a bit more to my on the spot impressions of 'Sky City Adelaide' six weeks ago.

The casino is sited in the old railway station building. However, that possibly gives a wrong impression. Railways management may long have moved out. But the commuter trains still go to the 'old station'. The situation is analagous to Wellington Railway station. Except there is also a new railway station in Adelaide on the outskirts of town. But that new station is principally there to service the interstate trains: "The Ghan" that runs from Adelaide to Darwin and the "Indian Pacific" that passes through Adelaide on route from Sydney to Perth.

It is true that the old station is not really in what I call the commercial centre of the city for residents. It is however in the tourist district (right over the road from my hotel which was convenient) and adjacent to the river and town hall complex, with the museums, state art gallery and state library within easy walking distance. Furthermore, there is a free tram (actually it's more like a light train) that runs from the 'old railway station' to the main Adelaide business district and vica versa. Before visiting Adelaide I had the impression that the location of the casino was far from ideal. But really, I don't think location is a problem. The casino is easy to get to. I certainly didn't see any "car park full' signs. That made me think that the new car park project (since cancelled) might be of dubious merit. I was surprised how well city founder Captain Willam Light's layout of Adelaide city worked. Adelaide is a city the size of Auckland, but it was seemingly immune from traffic jams, even of the kind I see daily in Christchurch - a considerably smaller place.

The other factor I hadn't fully appreciated was that Adelaide is the slowest growing of the state capital cities (behind Darwin, Perth, Sydney and Melbourne in that order). So there isn't the population push to keep Adelaide moving forward at the same pace as those other capital cities. Interesting as Adelaide was, I think it is fair to say that it is part of the 'secondary tourist circuit' in Australia. You can partly tell that by the restaurants. Dine out anywhere in Sydney and Melbourne and you can more or less guarantee that you will be served by an an ethnic European who has made Australia home or a tourist on an OE working holiday from the Continent. And some of those 'working holidays' can last for several years! In Adelaide, most of the hospitality industry workers are born and bred Australian and, if not, likely to be educated in Adelaide which houses a well respected university (one of three) majority dedicated to the tourist trade.

The Adelaide casino does have a high roller high value tourist element. But in order to prosper my feeling is that it will have to look to the local community. That isn't necessarily a bad thing. But it does mean growth prospects will always be limited, in particular in comparison with Darwin and Auckland. One tip to keep fellow shareholders amused should you ever dine in the 'Norths' ground floor a la carte restaurant. If you are ordering wine for dinner, make it the most expensive bottle you can afford. The more expensive the bottle is, the futher up it is on the 'wine wall' . And it is quite an amusment watching the staff scaling the equivalent of a two story building by ladder to retrieve your wine request!

SNOOPY

discl: hold SKC