These stocks — casino operators and alternative plays such as limited payout machines , electronic bingo terminals and sports betting — have given nifty turnaround payouts since slumping to near record lows in May 2020, when the Covid pandemic unceremoniously shut up operations.
Sun gained about 25% in the first few months of 2023, and shifted up 55% over the past six months. That’s an extraordinary performance. But on a forward earnings multiple of nine and a dividend yield of more than 7.5% there may still be a few more upward strides. With Sun’s debt culled to a much more reasonable level, and with the option of selling off smaller casino properties to bolster the balance sheet further, dividend expectations are understandably high.
Interim numbers were much improved, and the confidence the directors have that the business is continuing on a recovery trajectory was underlined by a half-year payout of 30c a share from basic and diluted adjusted headline earnings of 85c a share. Tsogo pointed out in its interim commentary that despite the completion of various transactions, net interest-bearing debt and guarantees were reduced by R535m to R8.5bn at the end of September.
While the two large casino groups will probably be the most popular hands for punters, the two alternative gaming plays — RECM & Calibre and Grand Parade Investments — are definitely worth a flutter too. At the close of the mandatory offer in early April, GMB spoke for about 53% of GPI. Investors might look at GMB-controlled GPI in a new light. The group offers, in effect, a “best of Sun International” — giving investors access to two of the most profitable gaming assets in South Africa: Sun Slots and GrandWest .
At last count RAC valued its stake in Goldrush, which is its only asset, at just over R1.2bn. There is about R260m in debt to subtract, plus capital gains tax and other liabilities of R100m. The point is that RAC’s NAV sits at about R877m, or R17.64 a share, vs a market value of R574m, or a share price of about R12.50.
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