6 things only SKYCITY Entertainment Group Limited-Ord investors will know

Do you know these six things about SKYCITY Entertainment Group Limited-Ord (ASX: SKC)?

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SKYCITY Entertainment Group Limited-Ord (ASX: SKC) has been flying under the radar in 2015 as it quietly goes about its growth strategy. For new investors, or those looking for a sustainable, growing dividend, here are six things that only current shareholders will know about the company:

1. Where the company is headed

In a similar approach to Crown Resorts Ltd (ASX: CWN), SkyCity is focused on developing one-stop entertainment hubs. These are precincts which draw people to an area with offerings beyond the traditional casino and deliver a more diverse stream of revenues.

SkyCity is following this strategy in both Adelaide and its flagship Auckland site. Combined, SkyCity expects the two assets to result in a fundamental shift in earnings from financial year 2015.

150512 RP - SKC step-change growth

Above: Anticipated step-change in SkyCity's earnings growth. Source: SKC company presentation.

2. How important Auckland is

Auckland is SkyCity's 'economic powerhouse'. It contributes almost 60% of the company's normalised revenue and has a number of medium and long-term tailwinds to propel it going forward. Auckland city's strong migration and population growth are helping drive medium term demand, while longer term the planned International Convention Centre and extended gaming facilities will deliver strong cash flow growth.

3. That the company has a great sustainable competitive advantage…

As a monopoly operator of casino licences in all of its key markets, SkyCity has a core competitive advantage. Although the advantage comes at the cost of higher government regulation and is not infallible (governments can and do change their minds), minimising local competition is an undeniably valuable feature.

4. …but it's not bulletproof

As if to prove the point, last month the Northern Territory Government imposed a Community Benefit Levy on casinos, including SkyCity's Darwin casino. The Levy will etch out an additional 10% of gaming machine revenue from 1 July 2015, which SkyCity estimates will have an annual cost to Net Profit After Tax (NPAT) of NZ$4 million.

5. The company could be in for a big year

Current operating conditions suggest SkyCity could be in for a big full year result. January trading started strongly, with revenue and EBITDA growing across all properties according to the company's first half announcement.

Auckland in particular was on fire, with normalised revenues up 33.9%, while International Business delivered strong turnover at win rates "well above theoretical". The strong Auckland economy has remained, so investors could be set for a positive earnings result.

6. Why SkyCity is a great dividend play

Current SkyCity investors will be well versed in the company's dividend policy. The policy ensures a minimum dividend of NZD 20 cents per share per annum and not less than 80 percent of annual (normalised) Net Profit After Tax (NPAT).

This comes subject to maintaining the company's investment grade credit rating and giving priority to the funding of strategic projects. SKYCITY's recent interim dividend was 25% franked in Australia.

Motley Fool contributor Regan Pearson owns shares in SKYCITY Entertainment Group Limited. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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