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SKYCITY'Entertainment'Group'Limited'
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Comprehensive'Company'Analysis''

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INVESTMENT(RESEARCH(GROUP(LIMITED(
August!1,!2013(
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SKC.NZ!

1st!Aug,!2013!

Services!

Contents!

1.0!Introduction!...........................................................................................................................................!3!
2.0!Analyst!Recommendations!&!Revisions!.................................................................................................!3!
3.0!Highlights!...............................................................................................................................................!3!
4.0!Business!Description!..............................................................................................................................!5!

4.1!Revenue!Breakdown:!.........................................................................................................................!6!
4.1.1!SKYCITY!Auckland:!......................................................................................................................!6!
4.1.2!Rest!of!New!Zealand:!..................................................................................................................!6!
4.1.3!SKYCITY!Adelaide:!.......................................................................................................................!6!

4.1.4!SKYCITY!Darwin:!..........................................................................................................................!6!

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4.1.5!International!Business:!...............................................................................................................!6!

5.0!Industry!Overview!and!Competitive!Positioning!...................................................................................!7!
5.1!Gambling!trend!in!NZ!.........................................................................................................................!7!
5.2!Skycitys!Competitive!position!...........................................................................................................!7!
6.0!The!Convention!Centre!Deal!..................................................................................................................!9!

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6.1!Adelaide!Expansion!............................................................................................................................!9!
6.2!Queenstown!......................................................................................................................................!9!
7.0!Performance!........................................................................................................................................!10!
7.1!Skycity!announces!new!dividend!policy!...........................................................................................!10!
7.2!Outlook!............................................................................................................................................!11!
8.0!Financial!Analysis!.................................................................................................................................!11!
8.1!Earnings!...........................................................................................................................................!11!

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8.2!Cash!Flow!.........................................................................................................................................!11!
8.3!Balance!Sheet!&!Financing!...............................................................................................................!11!

9.0!Management!&!Substantial!Investor!Overview!...................................................................................!11!
10.0!Investment!Merits!.............................................................................................................................!12!
10.1!Extension!of!casino!license:!...........................................................................................................!12!
10.2!Expansion!Plans:!............................................................................................................................!12!
10.3!International!VIP!Business:!............................................................................................................!13!

11.0!Investment!Risks!................................................................................................................................!13!
11.1!Economic!Slowdown:!.....................................................................................................................!13!
11.2!Regulatory!Risk:!.............................................................................................................................!13!

Investment!Research!Group''

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SKC.NZ!

1st!Aug,!2013!

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11.3!Achieving!required!customers:!......................................................................................................!13!
11.4!Interest!rate!risk:!...........................................................................................................................!14!
11.5!Currency!Risks:!...............................................................................................................................!14!
12.0!Market!Consensus!.............................................................................................................................!15!
13.0!Summary!............................................................................................................................................!15!

Appendices!................................................................................................................................................!16!

Appendix!i:!5!Years!Consolidated!Income!Statement!(Historical)!.........................................................!16!

Appendix!ii:!5!year!Consolidate!Balance!Sheet!(Historical)!...................................................................!17!
Appendix!iii:!5!year!consolidated!Cash!flow!Statement!(Historical)!......................................................!18!

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Appendix!iv:!Acknowledgement!............................................................................................................!19!

Investment!Research!Group''

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SKC.NZ!

1st!Aug,!2013!

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SKYCITY!Entertainment!Group!

Current(Price:($4.22(
1.0!Introduction!

Group!

SKYCITY(Entertainment(Group(Limited!(SKC.NZ)!operates!in!the!gaming/entertainment,!hotel!and!
convention,!hospitality,!recreation,!and!tourism!sectors.!The!Company's!operating!segments!includes!
casino!operations,!hotels!and!convention,!food!and!beverage,!car!parking!and!Sky!Tower!and!a!number!
of!other!related!activities!spread!over!Auckland,!Adelaide,!Darwin!,Hamilton,!Queenstown!and!other!
international!business.!Skycity!employs!over!6,600!staff!and!was!listed!on!NZX!in!1996.!
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2.0!Analyst!Recommendations!&!Revisions!

1$Month 2$Month 3$Month

Ago
Ago
Ago

3
1
4
0
0

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1)$BUY
2)$OUTPERFORM
3)$HOLD
4)$UNDERPERFORM
(5)$SELL

Current

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1"5$Linear$Scale

Mean$Rating
Consensus$Recommendation

2.12
Outperform

*Source:!Reuters!Analyst!consensus!31st!July,!2013!

3
1
4
0
0

3
1
4
0
0

3
1
4
0
0

2.12

2.12

2.12
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3.0!Highlights!

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NZICC(and(expansion(in(Australia:!National!Convention!Centre!project!in!Auckland!
and!expansion!of!the!Adelaide!casino!is!expected!to!significantly!enhance!shareholder!value!
over!time.!The!addition!of!new!gaming!products,!lower!gaming!taxes,!and!the!change!to!
cashless!gaming!from!a!coinfbased!system!will!substantially!lift!unit!revenue!and!widen!margins!
for!the!gaming!business.!Furthermore,!the!creation!of!a!sixfstar!hotel,!restaurants!and!parking!
facilities!will!enhance!the!casino's!appeal,!and!drive!visitations.!!
Monopolistic(Business(with(favourable(economic(advantage:!Skycitys!primary!business!has!
competitive!advantages!due!to!local!casino!monopolies.!The!Auckland!casino!license!is!exclusive!
until!2048!while!Adelaide!and!Darwin!in!Australia!enjoy!exclusivity!until!2035!and!2026!
respectively.!The regulatory!requirements!in!gaming!are!stringent!and!act!as!a!major!barrier!to!
entry!for!other!competitors.!Obtaining!a!casino!license!and!site!approval!is!a!lengthy!process!
given!the!social!and!community!impact!and!the!change!in!regulatory!environment!anytime!soon!
either!in!New!Zealand!or!Australia!given!widespread!public!opposition!to!gambling!in!general!is!
highly!unlikely.!The!outcome!of!this!is!that!Sky!City!will!continue!to!operate!as!a!monopoly!for!
the!foreseeable!future!with!favourable!economic!advantage.!!!

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