Sun International - Hot or Not
Sun International, South Africa's second largest casino and resort operator, is undergoing significant change after a number of years of underperformance.
Duncan Artus sets out the investment case for the company.
Casinos are effectively local monopolies sun international casino vacancies South Africa since competition is restricted by the finite number of licences available.
However, they do have to compete with spend on goods and services, as well as other forms of leisure activity.
As shown in Graph 1, growth in gross gaming revenue GGR has been very slow since 2008, lagging the growth in turnover of listed retailers by far more than we expected.
In a typical casino, sun international casino vacancies of customers can generate over 70% of revenue.
These customers have probably not benefited to the same extent from credit extension and the strong growth in the public sector wage bill and social grants sun international casino vacancies those who have driven retail growth.
Customers still visit casinos but spend less per person than before.
This causes margins to fall as casinos still incur the same costs, but receive less revenue.
Other than the taxes paid on GGR, https://n-club.info/casino/red-rock-casino-promo-codes.html casino's short-term cost base is mostly fixed, magnifying any change in revenue on the bottom line.
It is difficult for casinos to raise prices this would mean changing the win ratio to offset rises in costs.
When a company or industry goes through a prolonged difficult period, change invariably comes about.
Senior management changed at Sun International and, after reviewing the business, decisions were made to firstly aggressively reduce costs and secondly, to restructure the portfolio of assets.
Cost cutting Faced with negligible growth in gaming revenue, low hotel occupancies and the need for continuous capital investment to maintain operations, read article had to take a hard look at the cost base and search for new revenue-generating opportunities.
The outcome sun international casino vacancies a significant restructuring of the cost base.
The potential cost saving seems to be as high as R300m sun international casino vacancies, on a revenue base of R10bn, would go a long way to restoring margins without relying on a rebound in GGR.
Restructuring the portfolio Sun Sun international casino vacancies plans to reduce downside risk, exit low return assets and reinvest in opportunities with better returns.
These plans are summarised below.
Tsogo Holdings has also bought a further 25% from Grand Parade Investments.
This should result in a rational outcome for all the parties involved in Cape Town gaming.
This is at an attractive valuation considering the future capital investment the here need.
The investment in Colombia is far smaller, but creates opportunities for potential expansion.
There is potential to significantly increase cash flow by turning Sun City into a destination casino once again on a restructured cost base.
With a very high replacement value, Sun City could also possibly be sold at an attractive price.
Upsides and downsides in investing There are risks in any business and for Sun International these include continued low revenue growth, a full public smoking ban in South Africa, higher taxes and potentially bad capital allocation in Latin America.
There are also potential upsides.
An unexpected recovery in GGR at the South African operations would result in sun international casino vacancies meaningful increase sun international casino vacancies cash flow given the lower cost base.
In addition, the cash flow needed to be spent on maintaining the operations would reduce as a proportion of revenue.
With the major global casino operators focusing on Asia, Sun International has the opportunity to continue growing in Latin America without having to overspend to establish or acquire new casinos.
The share price has already begun to discount many of the changes in the business, but we believe Sun International provides an attractive opportunity on depressed cash flows in an expensive stock market.
Duncan Artus Duncan joined Allan Gray in 2001 and has been managing a portion of client equity and balanced portfolios since January 2005, when he was appointed as a portfolio manager.
He is a director of Allan Gray Group Proprietary Limited.
Duncan holds an Honours degree in Business Science and Postgraduate Diploma in Accounting from the University of Cape Town and is a CFA® and CMT® charterholder.
Low single-digit returns from.
MultiChoice owns the dominant pay-TV business in South Africa, DStv, wi.
Because of its dominance, including or excluding the share will have a.
The financial services, products or investments referred to on this website are not available to persons resident in jurisdictions where their availability or distribution would contravene local laws or regulations and the information on this website is not intended for use by these persons.
By selecting one of the countries below I confirm that I have read and understood the above and that: a I am not a South African citizen; or b I do not reside in the Republic of South Africa; or c I am not otherwise a person to whom the communication of the information contained in this website is prohibited by the laws of my home jurisdiction; and d I am not acting for the benefit of any such persons mentioned in ab and c and e I confirm that any investment with Allan Gray is based on my own initiative and not due to any offer or solicitation by Allan Gray.
Sun Vision December 2017 Episode
Simple and concise CV authoring templates. Search the jobs database 3 jobs available and counting... Apply Follow a simple step-by-step application process.
Your phrase is magnificent
It is the valuable information
You commit an error. Write to me in PM, we will talk.
The authoritative point of view, funny...
I join told all above. We can communicate on this theme.
I know, how it is necessary to act...
Very useful message
I think, that you are mistaken. I can defend the position. Write to me in PM, we will talk.
It is remarkable, very amusing idea
I think, you will find the correct decision.
Between us speaking the answer to your question I have found in google.com
And still variants?
Many thanks to you for support. I should.
Quite right. It is good thought. I support you.
In it something is. Clearly, many thanks for the information.
I consider, that you commit an error. Let's discuss it. Write to me in PM.
It is interesting. Prompt, where to me to learn more about it?
I can recommend to come on a site, with a large quantity of articles on a theme interesting you.
It agree, very useful phrase
It no more than reserve
And not so happens))))