What: SKYCITY Entertainment Group Limited-Ord (ASX: SKC) has entered a trading halt today with the New Zealand-based casino group announcing plans to raise around $243 million at $4.05 per new share.
So What: Under the details of the pro-rata entitlement offer, shareholders will have the opportunity to acquire 1 new share for every 10 existing shares held.
Proceeds from funds raised have been earmarked "to repay bank debt and reducing gearing, in order to support the funding of future capital expenditure commitments in Auckland and Adelaide."
Now What: Management took the opportunity to provide a Trading Update in conjunction with the announcement of a capital raising. Here's what was stated:
"SKYCITY continues to deliver improved financial performance for the YTD to 30 April 2016, with normalised group revenue (including Gaming GST) up 10.6% to $916.9 million and normalised group EBITDA up 12.1% to $281.3 million."
Like its peers, Crown Resorts Ltd (ASX: CWN) and Star Entertainment Group Ltd (ASX: SGR), which operate casinos in Melbourne (Crown), Sydney and Brisbane (Star), SKYCITY must also refresh and renew its casino offering.
The redevelopments which SKYCITY plans to undertake over the next few years certainly require significant capital expenditures as today's capital raising highlights. Indeed, the expected total development cost of the Adelaide project alone is around $300 million.
With SKYCITY noting that both the Adelaide and Auckland projects are expected to deliver significant increases in revenue and earnings over time, the capital outlay will hopefully prove well-conceived.
