SkyCity sells NZ, Fiji cinema interests for $61 million

SkyCity has sold its cinemas for $61 million to focus on core casino operations. Photo / NZ Herald.
SkyCity has sold its cinemas for $61 million to focus on core casino operations. Photo / NZ Herald.
Listed casino operator Skycity Entertainment Group has sold its cinema interests in New Zealand and Fiji - including interests on the Rialto group - for $61 million to cinema and exhibition operator ASX-listed Amalgamated Holdings Ltd, conditional on New Zealand Overseas Investment Act consent.

The sale, announced in late November, includes Skycity's core cinema businesses in New Zealand and its joint-venture interests in both Rialto and Fijian interests, but excludes Skycity's 50% shareholding in international ticketing group Vista Entertainment Solutions, all cash deposits and all its New Zealand freehold land.

Its shares remained unchanged at $3.40 after confirmation of the sale.

Craigs Investment Partners broker Peter McIntyre said the $61 million, which is expected to grow by a further $9 million in other cinema-related sales, would most likely be used to underpin Skycity's balance sheet as it focused on its Australian casino investments in Darwin and Adelaide.

Mr McIntyre said a smoking ban had prompted management to forecast a 15% downturn in revenue during the second half of 2010 and while Darwin was otherwise "operating efficiently", Adelaide had "untapped potential" as it recovered from the smoking ban.

"Its market penetration is below the Australian average and they will want to focus on building that up," he said.

Skycity said in a statement yesterday it would now divest its interests in residual cinema group assets and expected to boost its final total realisation of cinema sales to about $70 million.

Skycity, for which Craigs maintained a buy recommendation and a target price of $3.91, remained a "key" stock pick for 2010, Mr McIntyre said, on the basis of an improving local economy and tourism flows feeding through to casino patronage.

One negative factor to consider for the entire Australian casino sector was regulations proposed in October by the Australian Productivity Commission which would set betting limits and restrict cash acceptor machines to $20 notes, the commission having estimated up to 2.1% of Australians had gambling problems.


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