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“We estimate SKC’s monthly cash burn rate at around $35million”

“We estimate SKC’s monthly cash burn rate at around $35million”

Craigs Investment Partners says that company’s $425million cash reserve will help it survive the Covid-19 crisis but warns of losses.

New Zealand.- The impact of Coronavirus pandemic could cause losses for SkyCity Entertainment, New Zealand’s only listed casino operator, with the impact felt into the first half of 2021.

The forecast comes from Craigs Investment Partners, the largest brokerage in the country. Its analysts have taken into account the closure of all SkyCity properties for eight weeks and their estimate that it will take two years for tourist numbers to recover.

Craigs has lowered its estimate for normalised EBITDA for FY20, which ends on June 30, from $224million to $166million and normalised NPAT from $80million to $37million. A loss in the first half of 2021 is forecast.

“We estimate SKC’s monthly cash burn rate at around $35million while the properties are closed, meaning its $425million of available funds is sufficient for almost 12 months of closure,” Craigs said.

It adds that there is a risk of the company breaching banking covenants, but expects “debt holders could be flexible if trading restrictions have been lifted and there is a path to recovery of earnings, but we also now expect SKC to raise new equity”.

It also suggests that $300million would give the company greater headroom.

Among other measures to reduce costs during the crisis, SkyCity announced last week that it would lay off 200 staff and that another 900 would be affected in future. Executive staff will be asked to take pay cuts in order to retain jobs.

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