New Zealand Professional Investment Services Firm

Forsyth Barr

We are proud to be a New Zealand owned firm, with 21 offices throughout the country and over 300 employees. We assist personal, institutional and corporate clients providing a full range of investment services.

Forsyth Barr is a foundation New Zealand Exchange firm (NZX) and accredited market participant. We have been confirmed by the Financial Markets Authority as a Qualifying Financial Entity (QFE).

Research is the cornerstone of our advice. We have one of New Zealand's leading teams of analysts. Our global affiliations ensure comprehensive research coverage of all major investment markets.

New Zealand Professional Investment Services Firm, Forsyth Barr

Equity Bottom-Up

<h2>SKYCITY<br>FY20 Preview — A Year of Two Black Swans</h2>
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<p><strong>OUTPERFORM</strong></p>
<p>With FY20 headline numbers pre-released (impacted by&nbsp;COVID-19 and&nbsp;NZICC&nbsp;fire), and clarity likely difficult for FY21 given evolving restrictions, we expect the focus of&nbsp;SKYCITY's&nbsp;(SKC) upcoming result on 3 September to be (1) trading snippets, (2) liquidity/cash burn and (3) strategic initiatives. With the backdrop continually evolving, we are not expecting FY21 earnings guidance, however, are looking for any insights to help better assess the potential recovery path under various settings.</p>
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/156/274/original/image_83680408631598918280250.png?1598918284" class="editor-image img-responsive" data-smartkarma-image-id="156274"></figure>
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<p><strong>Conference call (12pm NZ time; 3 September)</strong>:&nbsp;Pre-registration required;&nbsp;<a href="https://s1.c-conf.com/diamondpass/10008865-invite.html" target="_blank" data-saferedirecturl="https://www.google.com/url?q=https://s1.c-conf.com/diamondpass/10008865-invite.html&amp;source=gmail&amp;ust=1599004241218000&amp;usg=AFQjCNGCEZ-A1zoP5wVCfV235L12wM726g" rel="noopener">https://s1.c-conf.<wbr>com/diamondpass/10008865-<wbr>invite.html</a></p>
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<h3>Key areas of interest</h3>
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<li><strong>FY20 headline numbers pre-released</strong>: On 20 August SKC indicated FY20 normalised EBITDA of NZ$199–202m, modestly ahead of our (and market) expectations and at the upper end of the previously signalled range. This implies 2H20 normalised EBITDA of ~NZ$47m, down c. -70%. Normalised/reported profit will be impacted by NZICC fire accounting and the impairment of Adelaide.&nbsp;</li>
<li><strong>Near-term outlook clouded by&nbsp;COVID-19 restrictions</strong>: FY21E is expected to be another 'messy' year; however, we see downside risk to our forecasts as a result of the recent return of community transmission of COVID-19 in New Zealand. This has seen a return of heightened restrictions for an unknown duration (until we return to Alert Level 1), including 18 days of closure for its key Auckland property (re-opened from 31 August; with material restrictions). Our base case currently assumes a return to 'normal' in FY22E (most areas) or FY23E (including IB and hotels) — which we are not expecting to materially change.</li>
<li><strong>Cash burn/net debt</strong>:&nbsp;The recent capital raise and near-term covenant waivers (Dec 2020 and Jun 2021), from both banks and&nbsp;USPP&nbsp;noteholders&nbsp;alleviates balance sheet questions. However, cash burn and a liquidity update will be of interest.</li>
<li><strong>Opex/capex&nbsp;and strategic initiatives</strong>: We expect commentary (and investor interest) to focus on the various initiatives, changes and plans as SKC continues to work to combat the challenges of COVID-19 (and a fast evolving backdrop) on its business.&nbsp;</li>
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<div><strong>Chelsea Leadbetter CFA</strong></div>
<div><a href="mailto:chelsea.leadbetter@forsythbarr.co.nz" target="_blank" rel="noopener">chelsea.leadbetter@<wbr>forsythbarr.co.nz</a></div>
<div>+64 4 495 5262</div>
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SKYCITY FY20 Preview — A Year of Two Black Swans

OUTPERFORM
With FY20 headline numbers pre-released (impacted by&nbsp;COVID-19 and&nbsp;NZICC&nbsp;fire), and clarity likely difficult for FY21 given evolving restrictions, we expect the focus of&nbsp;SKYCITY's&nbsp;(SKC) upcoming result on 3 September to be (1) trading snippets, (2) liquidity/cash burn and (3) strategic initiatives. With the backdrop continually evolving, we are not expecting FY21 earnings guidance, however, are looking for any insights to help better assess the potential recovery path under various settings.


Conference call (12pm NZ time; 3 September):&nbsp;Pre-registration required;&nbsp;https://s1.c-conf.com/diamondpass/10008865-invite.html


Key areas of interest



FY20 headline numbers pre-released: On 20 August SKC indicated FY20 normalised EBITDA of NZ$199–202m, modestly ahead of our (and market) expectations and at the upper end of the previously signalled range. This implies 2H20 normalised EBITDA of ~NZ$47m, down c. -70%. Normalised/reported profit will be impacted by NZICC fire accounting and the impairment of Adelaide.&nbsp;
Near-term outlook clouded by&nbsp;COVID-19 restrictions: FY21E is expected to be another 'messy' year; however, we see downside risk to our forecasts as a result of the recent return of community transmission of COVID-19 in New Zealand. This has seen a return of heightened restrictions for an unknown duration (until we return to Alert Level 1), including 18 days of closure for its key Auckland property (re-opened from 31 August; with material restrictions). Our base case currently assumes a return to 'normal' in FY22E (most areas) or FY23E (including IB and hotels) — which we are not expecting to materially change.
Cash burn/net debt:&nbsp;The recent capital raise and near-term covenant waivers (Dec 2020 and Jun 2021), from both banks and&nbsp;USPP&nbsp;noteholders&nbsp;alleviates balance sheet questions. However, cash burn and a liquidity update will be of interest.
Opex/capex&nbsp;and strategic initiatives: We expect commentary (and investor interest) to focus on the various initiatives, changes and plans as SKC continues to work to combat the challenges of COVID-19 (and a fast evolving backdrop) on its business.&nbsp;





Chelsea Leadbetter CFA
chelsea.leadbetter@forsythbarr.co.nz
+64 4 495 5262




SKYCITY: FY20 Preview — A Year of Two Black Swans

Skycity Entertainment

SKYCITY: FY20 Preview — A Year of Two Black Swans