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 (SKC) is likely to report a solid FY23 result on Wednesday, 23 August 2023.</li><li>We expect strong Electronic Gaming Machine (EGM) revenue in New Zealand will have offset the continued sluggish recovery in Adelaide, with table gaming revenue acutely impacted by cashless gaming trials that began in January 2023.</li><li>Our FY23 EBITDA forecast of NZ$309m is towards the top end of SKC's revised guidance range of NZ$300m–NZ$310m. </li></ul>

SkyCity (SKC) is likely to report a solid FY23 result on Wednesday, 23 August 2023.We expect strong Electronic Gaming Machine (EGM) revenue in New Zealand will have offset the continued sluggish recovery in Adelaide, with table gaming revenue acutely impacted by cashless gaming trials that began in January 2023.Our FY23 EBITDA forecast of NZ$309m is towards the top end of SKC's revised guidance range of NZ$300m–NZ$310m. 

SkyCity  - Setting Aside Some Chips — FY23 Preview

<ul><li>Casino operating environment shake-up a significant threat to earnings: Following a plethora of investigations that uncovered systematic wrongdoing across Australian casinos, empowered lawmakers and regulators have used the aftermath to fundamentally reshape the gambling industry across the Tasman</li><li>Valid argument for gaming tax rate increase in NZ: We see reasonable scope for New Zealand gaming tax rates to increase over the medium-term.</li><li>Impact from regulatory changes difficult to mitigate: There is likely to be limited steps SKC can take to mitigate the impact of regulatory or tax rate changes on its earnings. </li></ul>

Casino operating environment shake-up a significant threat to earnings: Following a plethora of investigations that uncovered systematic wrongdoing across Australian casinos, empowered lawmakers and regulators have used the aftermath to fundamentally reshape the gambling industry across the TasmanValid argument for gaming tax rate increase in NZ: We see reasonable scope for New Zealand gaming tax rates to increase over the medium-term.Impact from regulatory changes difficult to mitigate: There is likely to be limited steps SKC can take to mitigate the impact of regulatory or tax rate changes on its earnings. 

<ul><li>The South Australian Liquor and Gambling Commissioner (Commissioner) has issued a direction notice to SkyCity (SKC) which requires it to appoint a suitably qualified independent expert approved by the Commissioner</li><li>The Commissioner has advised that the appointment of an independent expert will provide an independent perspective of SkyCity Adelaide’s AML/CTF and host responsibility enhancement programmes and an additional layer of assurance.</li><li>The independent review into the suitability of SKC (the Martin Review) remains on hold pending the outcome of the AUSTRAC civil proceedings.</li></ul>

The South Australian Liquor and Gambling Commissioner (Commissioner) has issued a direction notice to SkyCity (SKC) which requires it to appoint a suitably qualified independent expert approved by the CommissionerThe Commissioner has advised that the appointment of an independent expert will provide an independent perspective of SkyCity Adelaide’s AML/CTF and host responsibility enhancement programmes and an additional layer of assurance.The independent review into the suitability of SKC (the Martin Review) remains on hold pending the outcome of the AUSTRAC civil proceedings.

SkyCity (SKC): Independent Expert Review of Adelaide Programmes

<ul><li>Table gaming revenue recovery lagging and compliance cost burden increasing</li><li>No major capex projects planned, focus on maximising value in Auckland</li><li>TAB/Entain deal a positive development in the battle for regulation of online casinos in NZ</li></ul>

Table gaming revenue recovery lagging and compliance cost burden increasingNo major capex projects planned, focus on maximising value in AucklandTAB/Entain deal a positive development in the battle for regulation of online casinos in NZ

SkyCity: Looking to the Horizon — 2023 Investor Day

<ul><li>We lower our rating on SkyCity (SKC) to NEUTRAL from OUTPERFORM in light of a regulatory backdrop that we expect will remain uncertain for more than the next 12 months</li><li>We accept that SKC appears good value (one year forward PE of ~13x) at current levels, though the risk of regulatory intervention into the current status quo is elevated</li><li>Our valuation now incorporates a material regulatory discount in addition to an anticipated AUSTRAC fine of NZ$50m. </li></ul>

We lower our rating on SkyCity (SKC) to NEUTRAL from OUTPERFORM in light of a regulatory backdrop that we expect will remain uncertain for more than the next 12 monthsWe accept that SKC appears good value (one year forward PE of ~13x) at current levels, though the risk of regulatory intervention into the current status quo is elevatedOur valuation now incorporates a material regulatory discount in addition to an anticipated AUSTRAC fine of NZ$50m. 

SkyCity: 1H23 — Downgrade on Regulatory Risks

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 - Setting Aside Some Chips — FY23 Preview

We expect strong Electronic Gaming Machine (EGM) revenue in New Zealand will have offset the continued sluggish recovery in Adelaide

Forsyth Barr

SkyCity: Regulatory Roulette

SkyCity's (SKC) current PE relative discount to the domestic market appears fair given the size and extent of the regulatory challenges it faces in...

Forsyth Barr

SkyCity (SKC): Independent Expert Review of Adelaide Programmes

The South Australian Liquor and Gambling Commissioner (Commissioner) has issued a direction notice to SkyCity (SKC) which requires it to appoint a...

Forsyth Barr

SkyCity: Looking to the Horizon — 2023 Investor Day

SkyCity's (SKC) Investor Day reiterated key themes and included a modest FY23 guidance downgrade; The focus of the day was on the value...

Forsyth Barr

SkyCity: 1H23 — Downgrade on Regulatory Risks

We lower our rating on SkyCity (SKC) to NEUTRAL from OUTPERFORM in light of a regulatory backdrop that we expect will remain uncertain for more...

Forsyth Barr

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