High-rolling days at Grand West

Posted On Tuesday, 16 March 2004 02:00 Published by
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CAPE empowerment group Grand Parade can’t be too worried about the money they borrowed from BoE Bank to increase their stake in the Grand West casino complex.

CAPE empowerment group Grand Parade can’t be too worried about the money they borrowed from BoE Bank to increase their stake in the Grand West casino complex.

Judging by interim results released last month by Sun International (the parent company of Grand West), cash flows from the Goodwood-based casino complex will be more than enough to service the additional debt load incurred by Grand West.

In the half year to end December, the Grand West churned up revenues 13.5% to R478 million.

Grand West’s performance is conspicuously better than Sun International’s other casinos like Sun City (up less than 1% to R411m), Gauteng’s Carnival City (up 1.4% to R276m), Durban’s Sugar Mill (down 24% to R176m) and Port Elizabeth’s Boardwalk (up 5% to R135m).

Interestingly Sun International’s luxury hotel, the Table Bay at the Waterfront, did not enjoy a great season in line with slack tourism figures no doubt driven by the firmer rand.

The Table Bay’s revenues were down 7% at R66 million, and operating profits of R19 million were whittled into a bottom line loss of R38 million.

Lower tourism numbers seemingly did not hamper Grand West’s performance too much. Perhaps Grand West’s performance is buoyed by the fact that its nearest competitors – Mykonos and Caledon - are relatively small operations and (geographically speaking) relatively removed from Cape Town.

Perhaps more startling for Grand Parade’s shareholders will be R181 million operating profits derived from Grand West.

That means for every rand spent at Grand West the casino is retaining a hefty 31c before tax and interest charges. Such a fat margin confirms suspicions that well located casino complexes have a licence to print money.

This means Grand West is more than three times more profitable than former old South African flagship Sun City.

As regards Sun International’s bottom line profits, the Grand West chips in R131 million, which is just less than a third of the total group earnings.

That’s equal to the collective contribution from Sun City, Carnival City, Sugar Mill and Boardwalk.

With Grand West rolling in the profits do Grand Parade consider the time ripe to launch a rights issue to retire the bulk of its debt?

No doubt more than a few investors may find Grand Parade’s direct investment in Grand West a tantalising option.

Publisher: Cape Business News
Source: Cape Business News

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