- Tsogo awaits Cape Town clarity on casino licences
Gaming and leisure group Tsogo Sun, which endured a tough interim period to end-September with discretionary spending tight, is hoping for clarity on a second Cape Town casino before the end of 2017.
The Western Cape government has long been debating the possibility of allowing one of four provincial casino licences to be transferred to the Cape Town metropole, where rival Sun International’s GrandWest casino has enjoyed an extended period of exclusivity.
On Wednesday, Tsogo CEO Jacques Booysen said there was an expectation that draft legislation around the second casino for Cape Town would be published for feedback for the end of December. "The potential to bid for the relocation of one of the smaller casinos in the Western Cape to the Cape Town metropole remains an opportunity for the group should the provincial authorities allow it."
If a second casino licence was allowed in Cape Town, Tsogo would be the odds-on favourite to benefit through its controlling shareholdings of the Mykonos, Caledon and Garden Route casinos. Tsogo also owns significant minority stakes in the GrandWest and Worcester casinos, which are controlled by Sun International.
Sun International has already launched court action to set aside any decision by the Western Cape government to allow the relocation of an outlying casino to the metropole, while Tsogo embarked on court action to compel the provincial authorities to allow such a relocation exercise.
Tsogo said settlement negotiations were ongoing but noted that legal proceedings had been stayed until the intended legislation was published.
While a second casino licence in Cape Town could be a huge revenue spinner, market watchers have said a new casino would probably require a huge capital commitment at a time when casinos are struggling for growth traction.
Tsogo is also banking on a strong profit kick in ensuing years from its newly acquired alternative gaming assets in the form of electronic bingo terminal operator Galaxy and limited payout machine specialist Vukani.
On Wednesday, investment company Niveus, which recently sold the bingo terminal operator and limited payout machine assets to Tsogo, reported that Vukani and Galaxy continued to trade well, with the consolidated ebitda (earnings before interest, tax, depreciation and amortisation) of the gaming businesses increasing to R265m (2016: R215m) in the half-year to end-September.
Dirk van Vlaanderen, associate portfolio manager at Kagiso Asset Management, said the acquisition of alternative gaming assets allowed Tsogo to diversify its gaming mix away from the more mature land-based casinos and tap into a higher-growth gaming market. The acquisition was likely to be more incremental to Tsogo’s growth profile than transformational.
Tsogo’s other large long-term bet is the redevelopment of its SunCoast casino in Durban at a cost of R1.6bn.