The SkyCity (ASX:SKC) share price is up 20% in September. Here’s why…

While the ASX 300 is down 3.2% in the first 2 weeks of September, SkyCity’s share price has surged more than 20%.

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The SKYCITY Entertainment Group Limited (ASX: SKC) share price is on a roll this month, up more than 20% so far in September.

By comparison the S&P/ASX 300 Index (ASX: XKO) is down 3.2% over that same time.

Like most shares, particularly those involved in the entertainment business, SkyCity’s share price was pummeled during the COVID-19 market rout, falling 66% from February 21 through March 23.

Since that low, SkyCity’s share price is up a whopping 122%. Although that hasn’t been enough to recoup all of its viral-induced losses, with the share price still down 25% year-to-date.

What does SkyCity do?

SkyCity owns and operates tourism, leisure and entertainment facilities with a focus on casino gambling. SkyCity shares are listed on the Australian and New Zealand exchanges.

In New Zealand, SkyCity operates casinos in Auckland, Queenstown and Hamilton. Its Australian casino is located in Adelaide. The Adelaide site is undergoing a $330 million expansion, with major works expected to be completed later this year. The company also provides conference facilities and restaurant services, along with hotel accommodations at its Auckland location.

The company has more than 5,000 employees. SkyCity shares began trading on the ASX in 1999. Today the company has a market cap of $2.1 billion.

Why is the Skycity share price smashing the ASX 300 in September?

While the broader market has been selling off, SkyCity share price has been rocketing higher.

Part of the renewed investor interest came following the release of its full year 2020 financial results on September 3. Although SkyCity suffered a 24% fall in normalised revenue, the company forecast that its FY21 normalised earnings before interest, tax, depreciation and amortisation (EBITDA) would be above its FY20 results.

Investors are also likely eyeing a two-fold potential revenue increase from SkyCity. One from the completion of its Adelaide expansion and the completion of its New Zealand International Convention Centre and Horizon Hotel projects. The second from investors with a longer-term horizon who expect SkyCity should see a huge ramp up in its business once the coronavirus is defeated or contained.

Until that happens, the company cautioned it didn’t expect to return to pre-COVID or FY19 EBITDA levels because of “negligible international business and international tourism activity due to ongoing international border closures”.

Still, it’s worth remembering that as recently as 24 January, SkyCity’s share price was 34% higher than it is today.

Motley Fool contributor Bernd Struben has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Sky City Entertainment Group Ltd. 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 Scott Phillips.

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