GAMBLING: A Fat Price For Caledon Casino
Recent Western Cape Business News
THE Cape gaming market has taken an interesting turn with Century Casinos, the US-based gaming group, selling off its stake in the Caledon Casino and Spa.
The buyer – empowerment group Hosken Consolidated Investments (HCI) – was willing to fork out R490 million for the Caledon Casino and the Newcastle Casino.
The price seems reasonable (but is by no means a bargain) based on the profits generated recently by both casinos, but the Caledon Casino has seen a marked slowdown in profit growth in the last few quarters.
Century Casinos reported recently that the Caledon Casino’s net operating revenue decreased 12% to $4 million for the third quarter of 2008.
But net revenue in rand terms was up 5% to R31 million even though the casino’s market share of Western Cape gaming revenue declined from 5.1% for the third quarter of 2007 to 4.8% for the third quarter of 2008.
Century Casinos believed rising fuel prices throughout 2008 led local patrons from Cape Town to gamble in Cape Town as opposed to travelling to Caledon.
Net operating revenue from Caledon for the nine months to end September 2008 was R94.3 million – slightly down on the previous year’s R95.2 million.
It was earlier rumoured that Grand Parade Investments (GPI) was a front-runner to buy the Caledon Casino – which would sit comfortably next to its interests in GrandWest and the Golden Valley Casino in Worcester. But GPI indicated to shareholders at its AGM in December that it was not interested in the Caledon Casino.
Exactly why HCI found the Caledon/Newcastle proposition so attractive is not clear at this point.
Cape Town-based HCI already has significant casino interests through its a 38% stake in Tsogo Sun, which holds casino interests in Gauteng (Montecasino), Durban (Suncoast), East London (Hemingways).
As HCI noted in a brief press statement: “The inclusion of these operations in the Tsogo Sun portfolio will provide additional geographic diversity and representation in casino and hotel operations for the group in markets not currently serviced by the existing Tsogo Sun Gaming and Southern Sun Hotel businesses.”
Tsogo, significantly, has no exposure to the lucrative Western Cape gaming market, which means the Caledon Casino offers HCI a very important regional licence. One also needs to remember (see separate story in this CBN edition) that HCI already holds a commanding position in the Western Cape Limited Payout machine market.
The Caledon Casino purchase should perhaps also be seen in context of HCI and Tsogo’s recent tilt at Gold Reef Resorts.
HCI and Tsogo opportunistically bagged a 20% stake in Gold Reef Resorts, effectively giving it a foothold in another two Cape casinos in the form of the Mykonos Casino and the Garden Route Casino.
That means HCI, technically speaking, holds influence in three of the five Western Cape casino licences. That’s a good hand if corporate action comes to the table in the casino sector in ensuing years.
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