SkyCity Entertainment announced that it wants to raise $177.76 million from shareholders. They plan to accomplish this by using a one-for-ten rights offer to fund their future growth projects.
SkyCity operates five casinos in New Zealand currently. Last month, the CEO of SkyCity, Nile Rogerson, unexpectedly resigned. He is reported to have resigned because of the job being very demanding.
The operator revealed in a filing with the New Zealand Stock Exchange that it wants to use the net proceeds to repay debt from the bank and reduce the gearing to be able to support their plans to fund their future capital expenditure and pledges in Adelaide and Auckland.
The successful Australian casino operator announced that each of their new shares will be priced at $2.97. There will be shareholders entitled to have one new stock for every ten that is currently held by them.
This famous operator recently reported a 10.2% increase year-on-year in revenues and earnings up to $379.98 million for the second half of 2015. Their reports also states that their half year earnings grew 15.4% before interest, tax, depreciation, and amortization. Their first half years earnings went up to $120.54 million. Its net profit represented a 28.2 percent boost after tax hit.
Many people question whether or not they should subscribe to the operator’s limited-ord capital raising. Also many question just how much impact do the additional shares have on its share price, each shareholder, and the company.
For those who are currently a shareholder of the compnay, a pursue for a full offer will need to occur. The reason is because if you do not do this, there is a chance that your ownership stake will become diluted. It is important to be careful about how discounted prices being offered makes it be more attracting.
For the current shareholders, the offer seems to be well timed because of the recent peak of its share price level. In other words, the company will have to have fewer shares in order to gain the capital it wants. This would reduce the dilution impact on the shareholders. When the process is complete, ten percent will be added to the number of SkyCity shares.
Now, a lot of people question will the share price fall down ten percent. The answer to the question is more than likely, no. SkyCity will be able to gain a large amount of cash for giving out ten percent more shares.
Since SkyCity will be using the funds for projects that are still being built, there will not be a quick earnings-accretive growth from the earnings of the money that was raised. This means that the earnings from the company will get divided over a larger number of shares. Reducing the earnings per share can potentially happen. If this occurs, the increasing price-ration-earnings is something that many investors would look at as a figure that can be used to represent the value.
More than likely the company’s p/e ratio would barely be below their pre-capital raising. This is due to the company’s outlook being a year of solid growth, along with a year to year EBITDA (Earnings Before Interest, Tax, Depreciation, and Amortization).
Should a person buy? Overall, there is a good chance that the projects being developed will have a good long-term contribution to their earnings once they are all finished. There is also a good chance that it will strengthen the company’s entertainment aspect of the company. SkyCity has already been having success at this. However, it is crucial to think about if the increase will be the right route for you. Thinking about your portfolio, especially ones that are connected to your other investing options is also very important.
The worst a person can do when deciding on whether or not they would want to buy something like this is not think carefully about their current financial status. Making these type of investments can be risky, regardless of how well the company is currently doing. Anything can go very wrong any company in the future. Also, something bad can occur with the economy that can cause the company to go down.
If you decide to go ahead and buy, try your best to be prepared as much as possible for the worse possible outcome. Fortunately so far, SkyCity has had a very good history and is the biggest casino operator in New Zealand.
Their future projects are definitely matters to look forward. These future projects will more than likely being a major contribution to the already thriving gambling atmosphere in Australia. SkyCity Entertainment has not failed us yet. Odds are the upcoming projects will be even better than their current ones.