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Key success factors ,such as exclusive casino licensing, customer satisfaction, tight
To evaluate the companys performances in the context of its goal and strategy,
financial statements are reformatted to separate its operating activities and financial
activities. Ratio analysis is utilized to compare companys performance in both timeseries and cross-sectional way.Additionally, justified ratio analysis provide more
reliable forecast for the valuation purpose.
Profitability&Growth
Return on Equity
Overall,Profit Margin followed a similar pattern as the other main ratios (e.g. NOPAT,
NROA and ROE).From 2011 to 2014,SKC has seen a continuing fall in PM from 21.04% to
16.46%.Looking at Tabcorp Holdings Limited (TAH)and Crown Resort Limited(CWN)[Appendix
4], SKCs performance remains medium. From the industry perspective, with the moving toward
digital interactive gaming, pacification is physical gaming like casino table games, keno are
beaten down.This pressing substitute weakens SKCs competitive advantage now and in the
future.As has shown above,the drop of NOPAT and its inadequate revenue generation have not
only dragged ROE down but also PM. we can see that SKC has tightening its expense on
Marketing and communications until now only take up 3.69% of sales.However, the expense on
Employee benefits expense,Direct consumables,and Depreciation and amortisation expense are
expanding which are the main cause of narrowing PM.Employee benefits are the main factor that
can be worked on.
Asset Turnover(ATO)
Starting with 1.96 in 2010,ATO gradually dropped during the years until in 2014,this
trend revered and increased from the bottom 1.69 in 2013 to 1.75 2014. The slowing
down of net operating asset reflect a redundant problem in its investment decisions
from 2010. From the data, the new International Convention Center caused attention
and brought rewards to the company and its intangible assets increased by 38%
compared with 2013.This is the main reason for the down trend to be reversed.
Financial ratios and cash flow analysis
Short-term Solvency
Current ratio has been dropping from 10.17% to 6.68% with the exception of
2011(11.93%).It is understandable that casino companies have most of its asset to be
non-current asset. Nevertheless,this low number still needs stakeholders attention.
Comparatively,TAH has an average current ratio of 38.33% for the same period,which
further signs an alert on SKCs short-term solvency.
A further examination is taken on interest coverage ratio.It has been kept above 2.67.
It seems that, even with heavy commitments to pay interests, SKC has been managing
safely with its repayment.
Long-term Solvency
Debt to equity ratio has been stable during the period, varying between 79.86%
to87.56%.The use of capital notes and derivatives are mean to finance recent projects
and manage exchange risks for its international business[FY2014 Annual Report].As
a result,non-current interesting liabilities constitute around53.32% of its total
liabilities.
Dividend payout ratio
Dividend payout ratio is generally increasing from 48.03% in 2010 to 89.79%(except
59.84%in 2011). On appearance, shareholders receive more return on each dollar they
invested,however, this is a sign of lack of promising investment opportunity,
Realizing the probable low returns on resort expansion and restructure, management
chose to increase its payout ratio to keep investors happy. Correspondingly, the
sustainable growth rate has been declining .The average growth rate in the past five
years is5.89%.
To sum up, from both short-term and long-term view, the financial stability of SKC is
medium.While holding its focus on it core casino business, investment in innovation
with its facility, service, digital area is another essential.
Cash flow analysis
CFO (Cash Flow of Operating activities) has been stable above $2 million, and its
trend is basically in line with revenue.This shows a less possibility of earning
management.For financial activities, from 2011,parent entity started receive advance
from its subsidiaries and increased its purchase of treasury shares. This pair of
financial activities contributed to the stability of CFF. CFI experienced ups and
downs.From 2012, with $164m investment outflow ,pay more to intangible
assets,mainly its licenses,which is six times of that in 2011.In 2013, this number go
back to $48m due to its receipt of sale of 50% interest in Christchurch Casino
Limited. In the recent 2014, CFI increased further to $167 million with its NZICC
Master Plan and Adelaide Expansionproject.
Appendix 1
Reformatted Income Statement
Appendix 2
Reformatted Balance Sheet
Appendix 3
Ratio Analysis
Appendix 4
ratio excel
Reference
https://www.bdo.co.nz/audit/IFRS/for-profit-soaps/new-framework-tier-1-and-2entities
https://www.skycityhamilton.co.nz/about-us/work-at-skycity
http://www.igea.net/2014/02/digital-consumption-fuels-new-zealands-video-gamesindustry-growth/
https://www.austgamingcouncil.org.au/agc-database