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WELLINGTON Sky City Entertainment Group, the largest New Zealand casino operator, is expected to post its first profit decline in three years due to costs building a hotel and expanding the company's gaming floors.
Profit could drop 2.2 percent to 117.4 million New Zealand dollars, or $76 million, this year, according to analysts surveyed by Thomson Financial. Analysts have cut their forecasts 4 percent since August, when Sky City said that falling consumer demand might have dented gambling revenue at its main Auckland venue, eroding earnings.
"Growth is going to be a bit slower," said Alan Moore, a fund manager at Milford Asset Management in Wellington. "People are just being a bit cautious on it."
The chief executive of Sky, Evan Davies, may revamp casinos in Auckland, Darwin and Adelaide to win more of the $15 billion regional gambling market amid rivalry from new resorts in Singapore and Macao. Sky City, which was outbid in 2005 for the Australian hotelier Taverner, could itself be a target in an industry where slowing growth spurred rivals to make $3.77 billion of acquisitions during the past three years to expand.
Companies including Publishing & Broadcasting, owner of Crown Casino, have acquired rivals and expanded to centers like Macao to chase growth in gambling profits. Four new casino resorts have opened in Macao in the past year, bringing the total to 21. In Singapore, the government is ending a four- decade ban on casinos to reap more money from tourists. Japan and Thailand are also considering lifting bans on casinos.
In August, Tabcorp Holdings, the biggest Australian gambling company, had its 1.9 billion Australian dollar, or $1.4 billion, offer for Unitab blocked by the Australian antitrust regulator.
"Sky City is potentially the next Australasian gaming stock, after Unitab, to come into play," Rob Bode, head of research at First NZ Capital in Auckland, said in a report. "Any further share price weakness could leave Sky City very vulnerable to predators."
Bode lowered his valuation on Sky City stock by 28 cents to 5.25 New Zealand dollars after the company posted its results last month.
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