Tsogo Sun Plans R5bn Casino Investment
Tsogo Sun, the leading South African hospitality and casino group, will be making a R5 billion investment in the casino industry, despite a lackluster trading environment. Tsogo Sun released its six month report (ending September 30th) last week, showing that it had seen a 4% increase in net income to R5.444 million in the period. This was despite a weak trading market in the country.
Year on year growth, according to the group, came from the purchase of hotel assets from Liberty. Tsogo Sun also bought a part of Southern Sun Ikoyi last year, adding to its revenue sources.
The company has 14 casino properties across South Africa, including its flagship property, the Montecasino in Gauteng.
The Chief Executive Officer of Tsogo Sun, Marcel von Aulock, said that the group would be investing over R5 billion – 17% of its market capitalization – on bolstering its casino presence in the South African gambling market in the coming months. According to Business Day Live, this “speaks volumes for directors’ confidence in its cash-generative abilities, even under stressful trading in both the hotel and casino sectors.”
While the government continues to speak about clamping down on electronic bingo terminals and prohibiting online gambling and dog racing betting, Tsogo Sun seems unperturbed by this trend. Analysts say that the group will not be affected by the potential national restriction of electronic bingo terminals.
Following the release of the group’s financial report, directors pegged the interim dividend at 29c a share.
Von Aulock said: “Our machine is still sound and generating cash. So we are happy to spend on our structures knowing that when trading conditions turn, they will turn strongly. We just hope that we are not miles away from that turn.”
Gaming win was described as “disappointing” with a 2% growth year on year to R3.429 million. Hotel room revenues grew 6%.
The highest provincial win came from Gauteng with a 4.4% growth, with Montecasino seeing a growth of 6.5% and Silverstar Casino 1.5% (impacted by expansion and redevelopment work in the period).
Revenues at Gold Reef City were impacted by a change in the gaming system, as well as refurbishment, which continues to take place into the second half of 2014.
Plans for the future include an upgrade of Durban’s Suncoast Casino, and R2.2 billion which is required to purchase 40% of SunWest gaming company.