SkyCity convention centre news spurs rise

Investors yesterday reacted positively to news SkyCity Entertainment was negotiating with the Government over a proposal to build a $350 million convention centre in Auckland.

The company's shares rose 6c in early trading to $3.52 before closing at $3.53, up 2.02%.

The proposed 3500-seat convention centre would be built between Hobson and Nelson Sts and is expected to provide an estimated $90 million boost to the Auckland economy through new spending by additional international visitors.

It is projected to attract 183,000 delegates annually, adding an extra 101,000 visitor nights and 350,000 additional delegate attendee days in Auckland.

SkyCity will pay the full construction costs but has asked that the Government consider alterations to gambling legislation and regulations.

Forsyth Barr upgraded the stock from accumulate to buy, with broker Peter Young saying that having SkyCity as the preferred developer of the convention centre was a positive announcement.

"The next stage is for SkyCity to negotiate the required regulatory concessions to justify it spending $350 million of shareholders' funds."

Among the key concessions expected to be sought were an expansion in gaming tables and machines, although no numbers had been received, he said.

SkyCity would have also sought an extension of its gaming licence, which expired in 2021, but that was seen as a formality, with little risk associated with the company not getting an extension, regardless of the convention centre development.

It was likely there was talk around relaxing of restrictions on the note acceptor on machines, currently $20, and an increase in cashless gaming - ticket in, ticket out - which operated on about 10% of SkyCity gaming machines, Mr Young said.

"SkyCity is targeting a January 2015 opening for the convention centre. We expect the negotiations, required law changes and detailed planning to take around 12 months before SkyCity starts digging in the ground.

"The national convention centre is positive for the company's existing facilities - hotels, restaurants, Sky Tower and casino - given the number of additional visitors to its precinct.

"However, convention facilities, at best, generate only a small return as a standalone operation."

Should the project proceed, Mr Young expected the company would be able to quickly capitalise on any gaming regulatory changes.

With the opening of its international and Pacific room facilities for its international high-roller and local Asian premium-table players, the company had vacant space on the mezzanine floor above the casino for a quick and cost-effect expansion of its gaming facilities.

The company was also expected to modify the layout of its main gaming floor, which could be congested at peak times, he said.



Add a Comment