Ka-ching! Sun International’s sneaky little big earner
SunSlots was not viewed as a potential trump card, but it’s outperforming all of Sun’s casino properties
Investors might still be miffed at gaming group Sun International’s ill-timed decision to gear up for a massive investment in Pretoria’s Time Square casino … even if there are encouraging signs this new development is snatching market share in the competitive Gauteng market.
But Sun does deserve a lot of credit for making a very smart investment a few years ago in the GrandSlots limited payout machine (LPM) business – which has subsequently been renamed SunSlots.
Initially, SunSlots was not viewed as a potential trump card. But the record will show that SunSlots outperformed all of Sun’s casino properties in the year to end December – growing top line at 10% to R1.16bn and ebitda (earnings before interest, taxation, depreciation and amortisation) by a sprightly 15% to R287m.
This makes the SunSlots business the fourth biggest contributor to Sun’s profits – behind the flagship GrandWest casino in Cape Town, Time Square, and the Sibaya development in Durban.
In the interim period SunSlots generated a bigger ebitda than Carnival City in Gauteng and more than the collective profits from Boardwalk (PE), Windmill (Bloemfontein), Flamingo (Kimberley), and Golden Valley casinos.
While LPMs are probably rightly viewed as mini-casinos without the huge capital outlay and maintenance costs, some punters do fret about the margin.
But SunSlots managed in these brittle economic times to hold its ebitda margin close to 25% – a reassuring figure that is actually better than some small casinos.
While there seems to be a far runway for organic growth, the issue for Sun is might be whether it’s possible to capture more of this viable little niche via corporate action.