New Zealand Professional Investment Services Firm, Forsyth Barr

Forsyth Barr

New Zealand Professional Investment Services Firm

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.

Equity Bottom-Up

<ul><li>SkyCity’s (SKC) FY25 result was disappointing on multiple fronts.</li><li>Its inability to convert an asset sale over the past six months led to a NZ$240m capital raise—priced at a 30% discount to the last traded price and a 23% discount to the theoretical ex-rights price (TERP)—to remain within banking covenants.</li><li>FY26 reported EBITDA guidance of NZ$171m—NZ$191m is -10% below our previous estimate, due to higher NZICC losses and higher online investment.</li></ul>

SkyCity’s (SKC) FY25 result was disappointing on multiple fronts.Its inability to convert an asset sale over the past six months led to a NZ$240m capital raise—priced at a 30% discount to the last traded price and a 23% discount to the theoretical ex-rights price (TERP)—to remain within banking covenants.FY26 reported EBITDA guidance of NZ$171m—NZ$191m is -10% below our previous estimate, due to higher NZICC losses and higher online investment.

<ul><li>SkyCity’s (SKC) Adelaide casino has been found suitable to hold its South Australian casino licence.</li><li>The confirmation of suitability reassures investors that: (1) new management is driving a positive cultural shift at SkyCity Adelaide, which was duly noted by regulators; (2) SKC’s investment in compliance and its business transformation project is comprehensive and fit for purpose, albeit complex; and (3) the tail risk of a non-suitability finding has now been removed.</li><li>We estimate an A$50m penalty payable in FY26—short of the maximum potential penalty of A$75m—with credit applied for the NZ$60m programme of works agreed between SKC Adelaide and Kroll, and approved by the South Australian Government.</li></ul>

SkyCity’s (SKC) Adelaide casino has been found suitable to hold its South Australian casino licence.The confirmation of suitability reassures investors that: (1) new management is driving a positive cultural shift at SkyCity Adelaide, which was duly noted by regulators; (2) SKC’s investment in compliance and its business transformation project is comprehensive and fit for purpose, albeit complex; and (3) the tail risk of a non-suitability finding has now been removed.We estimate an A$50m penalty payable in FY26—short of the maximum potential penalty of A$75m—with credit applied for the NZ$60m programme of works agreed between SKC Adelaide and Kroll, and approved by the South Australian Government.

SkyCity Regulatory Clouds Clearing Above Adelaide

<ul><li>The most important new piece of information in SkyCity’s (SKC) FY25 result will be the impact of mandatory carded play (MCP) on NZ gaming earnings.</li><li>SKC’s key self-help strategy is the potential sale of a property asset (or assets), which could shore up the balance sheet and support a re-rating towards book value.</li><li>A weak consumer backdrop, particularly in NZ, has weighed on SKC’s gaming and non-gaming operations.</li></ul>

The most important new piece of information in SkyCity’s (SKC) FY25 result will be the impact of mandatory carded play (MCP) on NZ gaming earnings.SKC’s key self-help strategy is the potential sale of a property asset (or assets), which could shore up the balance sheet and support a re-rating towards book value.A weak consumer backdrop, particularly in NZ, has weighed on SKC’s gaming and non-gaming operations.

SkyCity FY25 Preview—Taking Bets On Carded Play

<ul><li>We upgrade SkyCity (SKC) from UNDERPERFORM to OUTPERFORM, reflecting an increasingly attractive risk/reward profile underpinned by: (1) its 45% discount to book value despite significant hard asset backing; (2) a clear pathway to deleveraging; and (3) improved free cash flow generation.</li><li>By FY27, we expect SKC to return to a c.12% free cash flow yield and offer investors a c.6% cash dividend yield.</li><li>The key risk to our investment case is the balance sheet, with our estimate of net debt to EBITDA in FY26 at c.3.5x, versus a debt covenant of 3.75x.</li></ul>

We upgrade SkyCity (SKC) from UNDERPERFORM to OUTPERFORM, reflecting an increasingly attractive risk/reward profile underpinned by: (1) its 45% discount to book value despite significant hard asset backing; (2) a clear pathway to deleveraging; and (3) improved free cash flow generation.By FY27, we expect SKC to return to a c.12% free cash flow yield and offer investors a c.6% cash dividend yield.The key risk to our investment case is the balance sheet, with our estimate of net debt to EBITDA in FY26 at c.3.5x, versus a debt covenant of 3.75x.

SkyCity - Know When to Hold'Em; Up to OUTPERFORM

<ul><li>SkyCity (SKC) is taking legal action against Fletcher Building (FBU) for significant delays and losses related to the New Zealand International Convention Centre (NZICC).</li><li>The delivery of the NZICC is over six years behind schedule, and SKC seeks over NZ$330 million in liquidated damages due to alleged breaches by FBU.</li><li>Attempts to resolve the dispute have been unsuccessful, with FBU rejecting the claims of breach of contract.</li></ul>

SkyCity (SKC) is taking legal action against Fletcher Building (FBU) for significant delays and losses related to the New Zealand International Convention Centre (NZICC).The delivery of the NZICC is over six years behind schedule, and SKC seeks over NZ$330 million in liquidated damages due to alleged breaches by FBU.Attempts to resolve the dispute have been unsuccessful, with FBU rejecting the claims of breach of contract.

SkyCity (SKC.NZ) - Filing Legal Proceedings Against Fletcher Building for NZICC

Australia

SKYCITY Entertainment Group Ltd. provides gaming and casino services. The Company offers various casinos accompanied with various bars, hotels, restaurants, and convention centers. SKYCITY Entertainment Group offers services in Australia and New Zealand.

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Skycity Entertainment (SKC AU)

SkyCity FY25 Result—Bad Beat

FY26 reported EBITDA guidance of NZ$171m—NZ$191m is -10% below our previous estimate, due to higher NZICC losses and higher online investment.

Forsyth Barr

SkyCity Regulatory Clouds Clearing Above Adelaide

The confirmation of suitability reassures investors that: (1) new management is driving a positive cultural shift at SkyCity Adelaide, which was...

Forsyth Barr

SkyCity FY25 Preview—Taking Bets On Carded Play

The most important new piece of information in SkyCity’s (SKC) FY25 result will be the impact of mandatory carded play (MCP) on NZ gaming earnings.

Forsyth Barr

SkyCity - Know When to Hold'Em; Up to OUTPERFORM

The key risk to our investment case is the balance sheet, with our estimate of net debt to EBITDA in FY26 at c.3.5x, versus a debt covenant of 3.75x.

Forsyth Barr

SkyCity (SKC.NZ) - Filing Legal Proceedings Against Fletcher Building for NZICC

SkyCity (SKC) is taking legal action against Fletcher Building (FBU) for significant delays and losses related to the New Zealand International...

Forsyth Barr

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