The SKYCITY Entertainment Group Limited (ASX: SKC) share price could be on the move on Friday after providing an update on an asset sale.
What was announced?
This morning the casino and resort operator announced that the sale of its Darwin business to Delaware North is now unconditional.
This follows the satisfaction of all conditions in the sale and purchase agreement the company entered into with Delaware North in November. This includes obtaining all necessary approvals from the Northern Territory Government.
According to the release, management now expects the A$188 million asset sale to complete on April 4.
SKYCITY's chief executive officer, Graeme Stephens, appeared pleased to have offloaded the business.
He said: "We are pleased that the sale of SKYCITY Darwin is now unconditional. The sale is consistent with our strategy to sell certain non-core assets and to allocate capital to assets and businesses which we feel are better aligned with our long-term strategic objectives."
SKYCITY purchased the Darwin-based casino in 2004 from MGM Grand and is believed to have paid A$195 million for it. Since then it has added a new hotel and pool, new bars and restaurants, and VIP facilities.
Should you invest?
I think this was a sensible decision by the company and will allow it to focus on its core New Zealand businesses and its expanding casino facilities in Adelaide.
However, when it released its half year results last month, management warned that the domestic and international economic environment is becoming more challenging. This meant that trading had fallen below expectations in the first few weeks of the second half.
In light of this, although its shares offer a generous trailing 5.1% dividend yield, I think investors would be better off staying clear of SKYCITY and industry peers Crown Resorts Ltd (ASX: CWN) and Star Entertainment Group Ltd (ASX: SGR) until trading conditions have improved.
Until then, travel and tourism shares such as Sydney Airport Holdings Pty Ltd (ASX: SYD) and Webjet Limited (ASX: WEB) could be better options for investors.
