SKC - Sky City

[Snoopy]

Snoopy , your FA view says $3.50 is fair value. This chart targets $2.50 which would exactly be a 20% overshoot on the downside in accordance with your 'rule of thumb'. Probably require something pretty gnarly to happen for that to occur but just an interesting coincidence I thought.

I guess it isn't a real surprise that FA and TA end up being 'tied at the data point'. Ultimately they are different reflections of the same thing. I should point out though that a 20% discount to my 'fair value' of $3.50 is actually $2.80, not $2.50. Of course a 'rule of thumb' is just that. And should be treated with an amount of uncertainty that that phrase implies. I would struggle to paint the circumstances that would reduce the SKC price to even that $2.80 that level though.

I have been to the Sky City venue in Darwin. It is a little 'out of town' (not that town is really that big), so you have to make a conscious decision to go to the site rather than 'just wander in on a night out'. I see the NT government has allowed a 60% jump in pokie machine numbers in the pubs and clubs, while simultaneously grabbing another $1m a year off the casino in local taxes. That has to be a long term hurt. Big money has been spent at Adelaide casino itself, but the car park is still a work in progress. This seems to be management's excuse for the Adelaide refurbishment falling a bit flat (so far). Then there is the problem at all venues with the 'high rollers' not being able to get as much money out of China to gamble with as they had previously. But when it comes down to it, Auckland is what will drive this company going forwards. The coming Convention Centre in Auckland is talked up by all parties. But what happens if it adds on a whole lot of extra costs, without the consummate returns that the increased number of gaming machines should allow? If all these ducks are shot down in a row, maybe a share price plunge down below $3 is not so far fetched?

SNOOPY