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Why the SKYCITY Entertainment Group Limited-Ord share price has sunk lower today

The SKYCITY Entertainment Group Limited-Ord (ASX: SKC) share price will be one to watch today after the gaming and entertainment company released its third-quarter update.

Key highlights from the release include (NZ$):

  • New Zealand quarterly revenue excluding International Business (IB) fell 1.2% on the prior corresponding period to $158.9 million.
  • Australian quarterly revenue excluding IB dropped 5.2% to $63.3 million.
  • Normalised International Business revenue increased 5.1% to $38.2 million.
  • Total reported revenue dropped 4% to $258.1 million during the quarter.
  • Year-to-date revenue down 5.3% to $791.2 million.

Overall I feel this was another disappointing quarter from SKYCITY. The biggest disappointment in my opinion was its key Auckland business. As it generates 54% of the company’s revenue, its performance has a big impact on its overall results.

In the first-half of the year the Auckland business performed well, but momentum was lost in the third-quarter and revenue fell 1.5% to $141.8 million. Though it is worth pointing out that management believes the segment will have a strong fourth-quarter due to a number of upcoming major events.

Elsewhere it was pleasing to see its International Business (VIPs) revenue bounce back and increase 5.1% during the quarter. But with the segment still down 26.6% year-to-date, it might be a little too soon to get excited.

Should you invest?

I haven’t seen anything in these results to change my opinion that investors would be best avoiding the company for the time being.

I feel there are far better options for investors looking to profit from the tourism boom. Two of my favourite at the moment would have to be Event Hospitality & Entertainment Ltd (ASX: EVT) and Mantra Group Ltd (ASX: MTR).

Not only are both shares priced fairly and positioned perfectly to profit from the tourism boom, they also provide generous fully franked dividends.

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The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of Event Hospitality & Entertainment. Motley Fool contributor James Mickleboro has no position in any stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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