Skycity Entertainment Group Revenues Impacted by a Higher New Zealand Dollar

Sky City advised that underlying net profit after tax, or NPAT, for first-half fiscal 2014 is expected to be in the range of NZD 65 million to NZD 68 million compared with NZD 72 million last year. The impact of currency appreciation is likely to be NZD 3 million while sluggish business conditions, especially in Darwin and Hamilton, and disruptions in Adelaide are likely to affect earnings by NZD 1 to NZD 4 million. In light of the guidance and the continuing uptrend in the New Zealand dollar, we are lowering our fiscal 2014 forecast to NZD 130 million from NZD 135 million and our fiscal 2015 forecast from NZD 154 million to NZD 148 million. However, our fair value estimate remains unchanged at NZD 4.60 per share as we have not changed our long-term projections. Our outer-year forecasts assume a New Zealand dollar/Australian dollar exchange rate of 0.80. However, should the exchange rate increase to 0.87, our fair value would reduce by NZD 0.35 per share to NZD 4.25 per share, all else being equal.