Tuesday, December 16, 2014

Reef Casino treads water

Following the recent collapse in dubious circumstances of the Aquis takeover bid Reef Casino Trust (RCT) has today updated with its estimated distributable profit and distribution for the period ending December 31.
Our current estimate of the distributable profit* for the full year 2014 is approximately $12.1 million. This estimate is after deducting project costs of the lapsed Aquis transaction of about $600K. The premium play win in 2014 is expected to be lower than 2013 which had an ‘above theoretical’ win rate.

Adjusting for the Aquis costs and also the $250k high roller bad debt incurred in the first half would lift the 2014 result close to $13 million. That would still be well below last years result at $13.9 million. Results for the last 5 years adjusted for the extraordinary items in 2014:

Reef Casino reports results on a calendar full year with the second half (2H) typically stronger than the first (1H). Longer term comparisons are complicated by a pokie tax hike in 2009. Closure of the upper floor for renovations in 2012 had some impact that year also. Looking through all that the recovery from the Post-GFC hit doesn't seem to now be going anywhere much.

The extent of how much the above theoretical premium win rate in 2013 influenced results isn't clear. Have to wait for the full results in February but I would call this a slightly disappointing result. The 2013 profit result included EBITDA of $19 million. This was the number adopted by the 'independent expert' in the takeover documentation for the assessment of a fair value range on an EBITDA multiple.

Media reports subsequent to the infamous Junket to Macau included indications from Fung Snr of $20 million EBITDA. Difficult to see how it would not fall short this year on these latest numbers but will wait and see.

Meanwhile trading in RCT has recovered with reasonable liquidity in historical terms following the deep collapse after the Fung Fiasco. RCT have maintained the 2H distribution at last years 17.25c which is above the distributable profit and topped up from reserves.

RCT 2 year Chart

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