THE BOTTOM LINE
Oh debt, where is thy sting? Actually it’s right here, Sun
A long way before Time Square starts spinning the cash flows that justify Sun International’s R4bn outlay
A trading update this week from gaming giant Sun International pushed its share price well below the pitch level of R57.82/share for the recent R1.5bn rights offer.
At face value things looked fairly chipper with Sun pencilling in headline earnings of between 112c/share and 135c/share for the half year to end June. This compared with a headline earnings loss of 78c/share in the prior period.But the expected adjusted diluted headline earnings of 96c/share and 115c/share does look a little shabby compared with the 198c/share notched up in the corresponding period in 2017.
What might cause further fretting is Sun’s admission that while its new mega-casino complex at Time Square in Pretoria has shown strong growth in activity, the all-important win percentage has been well below expectation.
For the record, Time Square achieved income of R582m and ebitda (earnings before interest, taxation, depreciation and amortisation) of R130m for the six-month period. More recent trading has been encouraging with casino income in July up 32% compared with the same month last year.The bottom line, however, is that Sun’s interim attributable loss from Time Square ballooned from R63m in 2017 to R182m due to higher depreciation and interest charges as well as there being no tax relief from the losses.
There is a long way before Time Square starts spinning the cash flows that justify its R4bn outlay. In the meantime, Sun’s total debt in SA stands at a slightly less burdensome R9.7bn – which is still, it must be said, more than the group’s market capitalisation of around R8bn.
The chips are down … as they say.