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 (SKC)&nbsp;&nbsp;&nbsp; 1H22 Result – Initial Impressions</h2>
SKYCITY (SKC) reported a materially COVID-19 impacted 1H22 result well below our (and consensus) expectations driven by lower than expected contributions from both Auckland and Adelaide, which was slightly offset by lower corporate costs (largely non-recurring savings). While disappointing, we believe the market should look largely through this given the myriad of COVID impacts through the period in what has been a fluid and challenging operating environment for SKC. Outlook commentary was unsurprisingly limited but SKC reiterated comments that it is targeting a return to pre-COVID level of earnings once fully operational (likely FY23/FY24).
Key areas of interest
<ul>
<li>Balance sheet: SKC reported net debt of NZ$685m, up +NZ$95m from FY21 and +NZ$37m from 31 October 2021 (NZ$648m) – SKC stated available liquidity of NZ$258m (up +NZ$28m from 31 October 2021 of NZ$230m). Helped by the resilience and strength of domestic gaming through FY21, SKC's balance sheet was in a solid position heading into FY22. Lockdowns have created near-term pressures with covenant waivers required to navigate the December 2021 testing period (with no interim dividend paid) and gearing set to be elevated at FY22. That said, notwithstanding extended lockdowns into 2H22 we remain of the view SKC should have balance sheet flexibility to effectively navigate the June 2022 testing period on its revised covenant terms (2x 2H22 EBITDA as opposed to last twelve months).</li>
<li>1H22 summary: Normalised EBITDA of NZ$36.2m (FB; NZ$51m, consensus; NZ$51.7m). Normalised NPAT loss of NZ$-19.5m (FB; NZ$-7.7m), consensus; NZ$-10.3m). The key misses versus our expectations were Auckland and Adelaide. Corporate costs came in lower than expected while Hamilton, Online, International Business (IB) and other NZ were all broadly in-line with expectations.</li>
<li>Outlook: Unsurprisingly no earnings guidance was provided in light of ongoing COVID-19 restrictions in NZ (and fluid operating settings). Recent trading upon re-opening appears solid with the orange setting comparable to pre-COVID levels (particularly EGMs in Auckland and Hamilton), albeit Auckland has been “impacted” since going to red on 23 January (this aligns with recent Star commentary when Omicron was highly prevalent in Australia in January). SKC reiterated prior commentary that it is targeting a return to pre-COVID level of earnings once fully operational (likely in FY23/FY24).
<ul>
<li>We expect to see consensus downgrades to FY22E to reflect the impacts of Omicron in NZ (restricted trading), particularly for the key Auckland property (~70% of EBITDA pre corporate costs). As has been the case historically, we expect trading to rebound when unrestricted and don’t expect any material changes to medium term consensus expectations (at this stage).</li>
</ul>
</li>
</ul>
Investor briefing – 12pm NZT (10am AEST)
Requires pre-registration;&nbsp;<a href="https://s1.c-conf.com/diamondpass/10019008-r65d76.html" target="_blank" data-saferedirecturl="https://www.google.com/url?q=https://s1.c-conf.com/diamondpass/10019008-r65d76.html&amp;source=gmail&amp;ust=1644885191549000&amp;usg=AOvVaw1F7m1Qjdcx0_5rtdmuKBsE" rel="noopener">https://s1.c-conf.com/diamondpass/10019008-r65d76.html</a>
1H22 result summary
<table class="table table-striped">
<tbody>
<tr>
<td style="width: 203.8pt; height: 13pt;">
NZ$m
</td>
<td style="width: 54.8pt; height: 13pt;">
1H21
</td>
<td style="width: 54.8pt; height: 13pt;">
1H22
</td>
<td style="width: 54.8pt; height: 13pt;">
% chg
</td>
<td style="width: 71.8pt; height: 13pt;">
Forsyth Barr
</td>
</tr>
<tr>
<td style="width: 203.8pt; height: 13pt;">
Revenue (incl gaming GST)
</td>
<td style="width: 54.8pt; height: 13pt;">
386.9
</td>
<td style="width: 54.8pt; height: 13pt;">
260.8
</td>
<td style="width: 54.8pt; height: 13pt;">
-33%
</td>
<td style="width: 71.8pt; height: 13pt;">
256.2
</td>
</tr>
<tr>
<td style="width: 203.8pt; height: 13pt;">
EBITDA
</td>
<td style="width: 54.8pt; height: 13pt;">
117.8
</td>
<td style="width: 54.8pt; height: 13pt;">
36.2
</td>
<td style="width: 54.8pt; height: 13pt;">
-69%
</td>
<td style="width: 71.8pt; height: 13pt;">
51.0
</td>
</tr>
<tr>
<td style="width: 203.8pt; height: 13pt;">
EBITDA excluding IB
</td>
<td style="width: 54.8pt; height: 13pt;">
120.6
</td>
<td style="width: 54.8pt; height: 13pt;">
38.1
</td>
<td style="width: 54.8pt; height: 13pt;">
-68%
</td>
<td style="width: 71.8pt; height: 13pt;">
52.0
</td>
</tr>
<tr>
<td style="width: 203.8pt; height: 13pt;">
Normalised profit
</td>
<td style="width: 54.8pt; height: 13pt;">
43.2
</td>
<td style="width: 54.8pt; height: 13pt;">
(19.5)
</td>
<td style="width: 54.8pt; height: 13pt;">
n/a
</td>
<td style="width: 71.8pt; height: 13pt;">
(7.7)
</td>
</tr>
<tr>
<td style="width: 203.8pt; height: 13pt;">
EPS (cps)
</td>
<td style="width: 54.8pt; height: 13pt;">
5.7
</td>
<td style="width: 54.8pt; height: 13pt;">
(2.6)
</td>
<td style="width: 54.8pt; height: 13pt;">
n/a
</td>
<td style="width: 71.8pt; height: 13pt;">
(1.0)
</td>
</tr>
<tr>
<td style="width: 203.8pt; height: 13pt;">
Dividend per share (cps)
</td>
<td style="width: 54.8pt; height: 13pt;">
0.0
</td>
<td style="width: 54.8pt; height: 13pt;">
0.0
</td>
<td style="width: 54.8pt; height: 13pt;">
n/a
</td>
<td style="width: 71.8pt; height: 13pt;">
0.0
</td>
</tr>
<tr>
<td style="width: 203.8pt; height: 13pt;"></td>
<td style="width: 54.8pt; height: 13pt;"></td>
<td style="width: 54.8pt; height: 13pt;"></td>
<td style="width: 54.8pt; height: 13pt;"></td>
<td style="width: 71.8pt; height: 13pt;"></td>
</tr>
<tr>
<td style="width: 203.8pt; height: 13pt;"></td>
<td style="width: 54.8pt; height: 13pt;"></td>
<td style="width: 54.8pt; height: 13pt;"></td>
<td style="width: 54.8pt; height: 13pt;"></td>
<td style="width: 71.8pt; height: 13pt;"></td>
</tr>
<tr>
<td style="width: 203.8pt; height: 13pt;">
EBITDA breakdown (NZ$m)
</td>
<td style="width: 54.8pt; height: 13pt;">
1H21
</td>
<td style="width: 54.8pt; height: 13pt;">
1H22
</td>
<td style="width: 54.8pt; height: 13pt;">
% chg
</td>
<td style="width: 71.8pt; height: 13pt;">
Forsyth Barr
</td>
</tr>
<tr>
<td style="width: 203.8pt; height: 13pt;">
Auckland
</td>
<td style="width: 54.8pt; height: 13pt;">
94.9
</td>
<td style="width: 54.8pt; height: 13pt;">
16.0
</td>
<td style="width: 54.8pt; height: 13pt;">
-83%
</td>
<td style="width: 71.8pt; height: 13pt;">
37.1
</td>
</tr>
<tr>
<td style="width: 203.8pt; height: 13pt;">
Hamilton
</td>
<td style="width: 54.8pt; height: 13pt;">
18.1
</td>
<td style="width: 54.8pt; height: 13pt;">
9.6
</td>
<td style="width: 54.8pt; height: 13pt;">
-47%
</td>
<td style="width: 71.8pt; height: 13pt;">
10.2
</td>
</tr>
<tr>
<td style="width: 203.8pt; height: 13pt;">
Other NZ
</td>
<td style="width: 54.8pt; height: 13pt;">
2.2
</td>
<td style="width: 54.8pt; height: 13pt;">
1.4
</td>
<td style="width: 54.8pt; height: 13pt;">
-36%
</td>
<td style="width: 71.8pt; height: 13pt;">
0.0
</td>
</tr>
<tr>
<td style="width: 203.8pt; height: 13pt;">
Adelaide (A$m)
</td>
<td style="width: 54.8pt; height: 13pt;">
25.2
</td>
<td style="width: 54.8pt; height: 13pt;">
10.8
</td>
<td style="width: 54.8pt; height: 13pt;">
-57%
</td>
<td style="width: 71.8pt; height: 13pt;">
15.4
</td>
</tr>
<tr>
<td style="width: 203.8pt; height: 13pt;">
International Business (IB)
</td>
<td style="width: 54.8pt; height: 13pt;">
(2.8)
</td>
<td style="width: 54.8pt; height: 13pt;">
(1.9)
</td>
<td style="width: 54.8pt; height: 13pt;">
n/a
</td>
<td style="width: 71.8pt; height: 13pt;">
(1.0)
</td>
</tr>
<tr>
<td style="width: 203.8pt; height: 13pt;">
Online/e-sports
</td>
<td style="width: 54.8pt; height: 13pt;">
5.1
</td>
<td style="width: 54.8pt; height: 13pt;">
7.1
</td>
<td style="width: 54.8pt; height: 13pt;">
n/a
</td>
<td style="width: 71.8pt; height: 13pt;">
7.0
</td>
</tr>
<tr>
<td style="width: 203.8pt; height: 13pt;">
Corporate costs &amp; other
</td>
<td style="width: 54.8pt; height: 13pt;">
(24.9)
</td>
<td style="width: 54.8pt; height: 13pt;">
(6.8)
</td>
<td style="width: 54.8pt; height: 13pt;">
n/a
</td>
<td style="width: 71.8pt; height: 13pt;">
(17.7)
</td>
</tr>
<tr>
<td style="width: 203.8pt; height: 13pt;">
Total EBITDA
</td>
<td style="width: 54.8pt; height: 13pt;">
117.8
</td>
<td style="width: 54.8pt; height: 13pt;">
36.2
</td>
<td style="width: 54.8pt; height: 13pt;">
-69%
</td>
<td style="width: 71.8pt; height: 13pt;">
51.0
</td>
</tr>
</tbody>
</table>
Source: Forsyth Barr analysis, Company reports

SKYCITY (SKC)&nbsp;&nbsp;&nbsp; 1H22 Result – Initial Impressions
SKYCITY (SKC) reported a materially COVID-19 impacted 1H22 result well below our (and consensus) expectations driven by lower than expected contributions from both Auckland and Adelaide, which was slightly offset by lower corporate costs (largely non-recurring savings). While disappointing, we believe the market should look largely through this given the myriad of COVID impacts through the period in what has been a fluid and challenging operating environment for SKC. Outlook commentary was unsurprisingly limited but SKC reiterated comments that it is targeting a return to pre-COVID level of earnings once fully operational (likely FY23/FY24).
Key areas of interest

Balance sheet: SKC reported net debt of NZ$685m, up +NZ$95m from FY21 and +NZ$37m from 31 October 2021 (NZ$648m) – SKC stated available liquidity of NZ$258m (up +NZ$28m from 31 October 2021 of NZ$230m). Helped by the resilience and strength of domestic gaming through FY21, SKC's balance sheet was in a solid position heading into FY22. Lockdowns have created near-term pressures with covenant waivers required to navigate the December 2021 testing period (with no interim dividend paid) and gearing set to be elevated at FY22. That said, notwithstanding extended lockdowns into 2H22 we remain of the view SKC should have balance sheet flexibility to effectively navigate the June 2022 testing period on its revised covenant terms (2x 2H22 EBITDA as opposed to last twelve months).
1H22 summary: Normalised EBITDA of NZ$36.2m (FB; NZ$51m, consensus; NZ$51.7m). Normalised NPAT loss of NZ$-19.5m (FB; NZ$-7.7m), consensus; NZ$-10.3m). The key misses versus our expectations were Auckland and Adelaide. Corporate costs came in lower than expected while Hamilton, Online, International Business (IB) and other NZ were all broadly in-line with expectations.
Outlook: Unsurprisingly no earnings guidance was provided in light of ongoing COVID-19 restrictions in NZ (and fluid operating settings). Recent trading upon re-opening appears solid with the orange setting comparable to pre-COVID levels (particularly EGMs in Auckland and Hamilton), albeit Auckland has been “impacted” since going to red on 23 January (this aligns with recent Star commentary when Omicron was highly prevalent in Australia in January). SKC reiterated prior commentary that it is targeting a return to pre-COVID level of earnings once fully operational (likely in FY23/FY24).

We expect to see consensus downgrades to FY22E to reflect the impacts of Omicron in NZ (restricted trading), particularly for the key Auckland property (~70% of EBITDA pre corporate costs). As has been the case historically, we expect trading to rebound when unrestricted and don’t expect any material changes to medium term consensus expectations (at this stage).



Investor briefing – 12pm NZT (10am AEST)
Requires pre-registration;&nbsp;https://s1.c-conf.com/diamondpass/10019008-r65d76.html
1H22 result summary




NZ$m


1H21


1H22


% chg


Forsyth Barr




Revenue (incl gaming GST)


386.9


260.8


-33%


256.2




EBITDA


117.8


36.2


-69%


51.0




EBITDA excluding IB


120.6


38.1


-68%


52.0




Normalised profit


43.2


(19.5)


n/a


(7.7)




EPS (cps)


5.7


(2.6)


n/a


(1.0)




Dividend per share (cps)


0.0


0.0


n/a


0.0


















EBITDA breakdown (NZ$m)


1H21


1H22


% chg


Forsyth Barr




Auckland


94.9


16.0


-83%


37.1




Hamilton


18.1


9.6


-47%


10.2




Other NZ


2.2


1.4


-36%


0.0




Adelaide (A$m)


25.2


10.8


-57%


15.4




International Business (IB)


(2.8)


(1.9)


n/a


(1.0)




Online/e-sports


5.1


7.1


n/a


7.0




Corporate costs &amp; other


(24.9)


(6.8)


n/a


(17.7)




Total EBITDA


117.8


36.2


-69%


51.0




Source: Forsyth Barr analysis, Company reports

SKYCITY (SKC): 1H22 Result – Initial Impressions

Skycity Entertainment

SKYCITY (SKC): 1H22 Result – Initial Impressions