New Zealand: Sky City hedges its bets on Asian high-rollers

After more than a year of takeover speculation and uncertainty, Morrison said the company, which has lost several senior staff over the past two years, was also in negotiations to hire six new gaming executives as it moved to "fine-tune" its casinos and lift earnings.

Morrison said the biggest opportunity for Sky City’s high-roller business, which makes up about 5% of the group’s earnings, was in Darwin because of the city’s proximity to Asia. But Morrison, formerly chief financial officer of Galaxy Entertainment in Macau and one-time chief operating officer of Crown, said the strategy to double high-roller bets from us$ 1.2 billion was not a direct plan to compete with James Packer’s casino.

"I don’t think it is taking on Crown," he said. "The international high-roller business is a very big business around the world, and all major casino players are interested in that space.

"We are a major casino player and I think that we should try a little bit harder in that area to compete against other players in that space … I’m hoping that we might be able to look at that business slightly differently and try and come up with something that’s a little bit different to run the business by."

Earnings before interest and tax from Sky City’s international business for big-spending gamblers, which attracted new players from Thailand, Singapore, Malaysia, South Korea and China, jumped to us$ 10.1 million in the first half of fiscal 2008, from a us$ 966,660 loss a year earlier.

The result was boosted by higher theoretical win rates, meaning players lost more money to the company than it had budgeted for. Morrison said more bets from high-roller gamblers would iron out some of the volatility arising from this.

While private equity group TPG is rumoured to be interested in Sky City’s Adelaide casino, Morrison said the property, which was taken off the sales block this year, would be retained by the company. He said the sale of Sky City’s cinema assets should be finalized in the next three months. The company is talking to two potential buyers.

Sky City last month posted its lowest profit in nine years as a listed company of us$ 1 million, after a us$ 48.3 million write-down of the cinema assets. Profit before the write-down was us$ 49.3 million.

Morrison, who started in the job this month, reiterated full-year profit guidance of up to us$ 88.6 million (before the write-down). Sky City shares fell more than 2% to us$ 3.24 yesterday.