Week Ahead | SkyCity Update

19 February 2020

​Global markets ​were mixed on Friday during a week where coronavirus threatened to become a pandemic that thwarts global growth. Economic data on Friday showed US retail sales rose in January for a fourth straight month as cheaper prices at the gas pump encouraged spending on other goods.

​For the week ahead, ​the focus locally will be​ announcements from Aussie and Kiwi companies. We will provide full updates on all stocks under our research coverage in our weekly report​, with stocks reporting ​this week ​includ​ing​ Heartland Bank, Spark NZ, Fletcher Building, Auckland Airport, Ebos Group, Genesis Energy​, QBE Insurance, BHP Billiton, Crown Resorts, Wesfarmers, WsieTech, Coca-Cola Amatil, Qantas, and Sydney Airport. 

 

Stock in Focus: SkyCity Entertainment (SKC:NZX / SKC:ASX)

​​SKC shares were higher after the company reported a 7.9% decline in underlying earnings, although the result was overshadowed by its insurance claim for the international convention centre fire. There was some relief as SKC shares had been hit hard on fears Coronavirus will hit tourist casino numbers.

At this stage, SKC are not expecting any material change in previous guidance for total project costs, with costs expected to be covered by insurance. Normalised (which adjusts for abnormal items) net profit after tax fell -15% from last year down to $75m, as the result was dragged lower by  weaker earnings from the International Business (IB). This result does not include the events of the Coronavirus (this will be realised in the second half), but for the 2020 financial year SkyCity downgraded its earnings. The downgrade is due to challenges that facing the International Business, with key high value customers cancelling visits due to the coronavirus.

​SKC also announced it has shelved plans for a luxury hotel in Queenstown highlighting the recent weakness in international business travellers. It bought the $16m property for development in May 2019 with plans to build a 5-star high roller hotel.​

Members should look out for a full update on SKC to be released in our weekly update. 
We currently have a ​BUY​ rating on ​SKC​.  

   
Australia & New Zealand Market Movers

​  
​The Australian market​ added to gains on Friday (ASX 200 Index +0.​38​%)​ as the ASX ended the week fractionally off a fresh record close, with strong earnings-related gains from IDP Education, Breville and Challenger helping investors to look past their fears about the speed of the spread of the coronavirus in China. Financials were the strongest performers by sector, with the big banks leading market gains last week.​

​On the flipside, vitamin group Blackmores dropped 17% after telling investors it had scrapped its first-half dividend after a dramatic 48% slide in profit and warned the second half will be even worse because of three months of disruption from the coronavirus outbreak​

The New Zealand market ​lost ground on Friday ​(-0.39%)​ as Synlait Milk led the market lower for a second day after it slashed its earnings outlook previously. Sharemarket operator NZX rose after it reported a full-year net profit of $14.6 million, up 7% from a year earlier. Shares in Tower Insurance also jumped​ post a well-received update.

 

3 Things Markets Will be Watching this Week

  1. ​​​Local earnings season ​continues ​across Australia & New Zealand this week.
  2. Minutes from the last US Federal Reserve meeting are released.
  3. US housing data and the latest employment picture in Australia.​
     
     

Have a Great Day,
 

Team

​For the week ahead, ​the focus locally will be​ announcements from Aussie and Kiwi companies.

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