SkyCity Entertainment Group (NZX: SKC) saw its shares jump 7.4% to NZ$0.65 on Monday, adding about NZ$49.6 million to its market capitalization. The sharp move came as investors focused on the company's NZ$30 million annualized cost restructuring program and planned asset disposals, even as fiscal 2026 results showed a significant decline in profitability.
The Auckland-based casino and entertainment operator reported underlying EBITDA of NZ$181.6 million for the year, down 22.3% from NZ$233.7 million in the prior year. Underlying net profit nearly halved to NZ$38.0 million from NZ$71.5 million, while revenue was relatively flat at NZ$822.7 million.
Despite the earnings slump, operating cash inflow surged to NZ$121.7 million, nearly three times the NZ$45.2 million generated in FY25. This improvement in cash conversion, driven by better working capital management, underpinned Monday's rally and provided a foundation for the company's recovery plan.
Cost Restructuring and Asset Sales
Management has targeted NZ$30 million in annualized operating cost savings for fiscal 2027, scaling up to NZ$70 million by fiscal 2028. The company also plans to raise NZ$275 million to NZ$300 million from asset sales, including the unconditional divestment of an office property for NZ$74.5 million expected to settle in September 2026.
These measures are designed to reduce net debt to below 2.0 times underlying EBITDA by FY27, down from 3.1x at the end of FY26. The planned asset sales represent 38% to 42% of the company's current market value, underscoring the scale of the balance sheet reset.
Convention Centre and Online Gambling Opportunities
SkyCity's new New Zealand International Convention Centre has already hosted 141 events and welcomed 100,000 visitors since opening. The company forecasts approximately 350,000 visits in FY27, providing an additional revenue stream. Chair Julian Cook and CEO Jason Walbridge expressed encouragement at the early results.
In the regulated online gambling space, New Zealand's gross gaming revenue is estimated at NZ$1.36 billion annually. Licences are expected to be granted later this year, with launches projected between December 2026 and June 2027. SkyCity has yet to secure a licence, but the market sees potential in this channel.
Analyst Sentiment and Risks
Analysts remain generally positive, with a consensus Buy rating and an average price target of NZ$1.012, implying 55.7% upside from Monday's close. However, price targets range from NZ$0.80 to NZ$1.50, reflecting uncertainty about the pace of recovery.
Key risks include continued softness in consumer spending, elevated Adelaide remediation costs, and the NZ$175 million retail bond maturing in May 2027. The hotel sale is not yet binding, and if asset sales fall through or cost savings are not achieved, the recent rerating could reverse.
Investors will be watching for the September property settlement, tangible progress on leverage reduction, and evidence of cost savings in FY27. Monday's share price jump gives management breathing room, but also raises the stakes for execution.