The SKYCITY Entertainment Group Limited-Ord (ASX: SKC) share price has dropped 15.3% over the past year, while the S&P/ASX 200 (Index: ^AXJO) (ASX: XJO) is up more than 4%.
Fellow casino operators Crown Resorts Ltd (ASX: CWN) and Star Entertainment Group Ltd (ASX: SGR) have also seen their share prices sink over the past twelve months – losing 3.5% and 12.5% respectively.
But despite announcing today that SkyCity will take an impairment on the value of the company's Darwin casino of A$95 million, the company's share price has hardly moved in trading today. The company says increasing competition in the gaming machine business is the primary reason, with the book value of the Darwin property now worth $195 million.
The casino company says the number of gaming machines in Darwin have increased by 75% since July 2015, since the Northern Territory government removed a cap on the number of machines.
SkyCity says the non-cash impairment won't affect the final dividend and won't impact its credit rating.
Its Adelaide casino is also being expanded at a cost of around $330 million, to add new hotel floors, new function space, expanded gaming and entertainment facilities and a rooftop bar. SkyCity says this should transform the casino into a world-class casino and entertainment complex. Casinos can be expensive to own, with regular capital expenditure required to refurbish them to continue attracting visitors.
Foolish takeaway
If SkyCity's share price continues to tumble, it could become a prospective takeover target from Star or Crown.
