There has long been a contention that Grand Parade Investments was the best vehicle to roll with in the gaming sector.

The thinking was that the company had a large exposure to Sun International’s most profitable casino, GrandWest (through a substantial shareholding in SunWest) as well as selected minority stakes in other Sun International casinos through a significant minority holding in (now delisted) Real Africa Holdings.

In other words, Grand Parade did not feel the drag of Sun International’s lower-margin “old SA” gaming operations like Sun City and the smaller urban casinos. It has since changed its strategic focus to that of a broader empowerment investment contender, a process kicked off after the company profitably offloaded its stake in Real Africa Holdings (to Sun International) and trimmed its equity holding in SunWest to 25,1%.

To date Grand Parade, which has a balance sheet capable of accommodating sizeable transactions, has not given much indication of its broader empowerment investment ambitions.

For now, though, the value in the company still resides in the SunWest holding, a reliable spinner of profits.

Grand Parade’s operational focus on limited-payout machines is also becoming more meaningful, as they churned out almost R200m in the interim period to end-December 2011. It would appear the machines managed to more than double profit contributions to R19m, which is encouraging in relation to building value outside the SunWest core.

What does stand out, though, is that Grand Parade’s shares continue to lag behind its tangible net asset value, which, at 356c/share, does include the 60c/share special dividend paid out after the close of the interim period.

Still, there is a 20% discount despite strong dividend flows (and management fees) from SunWest, encouraging top-line growth from the limited-payout machines and a cash-flush balance sheet.

Consequently, value-inclined investors might flock to Grand Parade , especially in view of the commitment of company chairman Hassen Adams to pay dividends. Others may see risk in the effort to diversify the investment portfolio away from gaming assets.

It might be pertinent then to debate whether the company , at a critical juncture of its transformation into a diversified empowerment contender, still trumps its larger corporate cousin, Sun International, as an investment option.

Sun International is clearly carrying some heavy baggage in the form of a lean-margined Sun City operation, which accounts for 13% of total revenue but less than 2,5% of operating profits.

The performance of Sun International’s casinos outside GrandWest was distinctly mixed, the encouraging showings by Sibaya in Durban and Carnival City in Gauteng offset by a poor showing by the Boardwalk in Port Elizabeth.

With Sun International’s borrowings extending to over R7bn ( gaming companies are traditionally geared much higher than industrial companies), it seems safe to assume that Grand Parade (depending on corporate activity) will secure a richer yield in the next few years for investors.

But Sun International does appear to have dealt itself a fresh hand in South America. The Monticello casino in Chile managed earnings before interest, tax, depreciation and amortisation of R127m (almost as much as Carnival City) from revenue of R671m in the interim period to December . That’s a margin of almost 19%, which suggests Sun International is delivering on its long-term goal of getting the sustainable margin to around 25%- 28%.

While taxes and electricity costs preclude Monticello from delivering the 35%-plus margins achieved in SA casinos, there’s enough upside to convince Sun International to press on in South America.

Sun International financial director Rob Becker believes pending changes to gaming regulations in South America (where most casinos are simply “slot halls”) might offer an opportunity to play a role in consolidating the industry. “There are some acquisition opportunities in South America, but we prefer start-up ventures, where the returns are better.”

Ultimately it’s an interesting call for punters. Grand Parade is probably the safer hand in terms of underlying value and the regular churn from limited-payout machines, while Sun International could end up holding a few aces offshore.