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Why the SKYCITY share price jumped 23% in September

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The SKYCITY Entertainment Group Limited (ASX: SKC) share price rocketed 22.8% higher in September to $2.75 per share.

Why the SkyCity share price rocketed higher in September

The September surge comes in a wild year for the wagering group which saw its valuation hammered lower in the March bear market.

A solid outlook for FY21 was a partial catalyst for the strong share price move.

SkyCity reported a 24% fall in normalised revenue but is expecting earnings before interest, tax, depreciation and amortisation (EBITDA) to climb higher this financial year.

There are still plenty of barriers ahead for the casino operators around the country. The SkyCity share price is still down 24.5% for the year alongside the likes of Crown Resorts Ltd (ASX: CWN) and Star Entertainment Group Ltd (ASX: SGR).

SkyCity also provided a 22 September update on its New Zealand properties. Positively, New Zealand’s easing restrictions mean there can be more events and promotions with electronic gaming machines and gaming tables operating as usual.

Provided coronavirus cases remain low, SkyCity earnings could see a significant contribution from the New Zealand operations in FY21.

Will it continue to climb in October?

I think we could see the SkyCity share price move sideways for this month. The market is inherently forward-looking and should be pricing in easing coronavirus restrictions across the country.

Any surprise announcements about casino openings would obviously see SkyCity’s value surge. Barring any major surprises, however, I don’t think we’ll see similar strong gains this month.

Uncertainty around COVID-19 is the major barrier. Investors don’t like uncertainty, especially when its around business continuity.

That means the SkyCity share price is not what I’d consider a safe buy right now. However, progress towards normalising the economy in Australia and New Zealand could spark a share price rally in late 2020.

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Motley Fool contributor Ken Hall has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Crown Resorts Limited and 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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