Sun International, a prominent hotel and casino group, expects significant profit growth in the first half of the year, which ends in June. This expansion is attributed to a rebound in tourism as well as impressive earnings from its online sports betting venture, SunBet. External factors, such as the depreciation of the Nigerian naira, have, however, slightly dampened the company’s performance.
The expected headline earnings per share for the six-month period are expected to rise between 73% and 98%, representing a significant increase over the R231 million profit figure recorded the previous year. Adjusted headline earnings, on the other hand, are expected to rise only 12%. This disparity is the result of an R39 million accounting hit related to dollar-denominated loans related to Sun International’s Nigerian operations.
SunBet emerged as a standout contributor to the company’s record-breaking revenues, confidently moving towards its ambitious growth goals. In comparison to the previous year, strategic capital resource management and proficient cash generation have enabled consistent control of net debt.
Sun International had nearly R8 billion in total debt, including lease obligations, as of the end of 2022, with a significant portion (R700 million) attributed to Nigeria. In contrast, the company kept an accessible cash reserve of nearly R380 million.
During the first half of the year, the company’s hotels and resorts delivered exceptional results. Simultaneously, urban casinos experienced continuous income growth, with the exception of Sun Slots, the limited payout machines enterprise, which faced challenges as a result of load shedding.
Sun International, which is worth approximately R9 billion on the Johannesburg Stock Exchange (JSE), manages four premier resorts and hotels in South Africa: the Maslow in Sandton, the Wild Coast Sun in the Eastern Cape, the Table Bay Hotel, and Sun City in the North West. In addition to these, the group manages nine urban casinos spread across various provinces, with the exception of Mpumalanga. Carnival City in Gauteng and GrandWest in the Western Cape are two notable properties in this portfolio. Sun International also owns and operates the Federal Palace, a single hotel and casino in Nigeria. The recent significant currency depreciation in Nigeria, which was authorised by the country’s central bank, has had a significant impact on the company’s operations.
Sun International’s revenue landscape in 2022 featured casinos, SunSlots, and SunBet as the primary revenue streams, accounting for roughly 80% of total revenue. Interestingly, Nigeria’s contribution to this revenue was less than 2%, demonstrating the importance of diverse sources of income.
Muneer Ahmed, an equity analyst at Denker Capital, emphasized the significance of the adjusted profit metric. Ahmed lamented the hindrance imposed by load shedding on the slot machine business and acknowledged the gradual revival of urban casinos.
In spite of the challenges, Ahmed deemed the company’s performance commendable in a demanding operational climate. Furthermore, he commended Sun International’s effective debt reduction strategy over the past 18 months. However, he stressed the importance of debt reduction, especially within the context of a high-interest rate environment.
Trading on the stock exchange reflected positive sentiment, as Sun International’s shares observed a nearly 3% increase during morning trade. Over a span of one year, the company’s shares have appreciated by more than a fifth.
