14 Jun 2012

SkyCity shares may come under further pressure

5:24 pm on 14 June 2012

SkyCity Entertainment shares could come under more pressure in coming days, as analysts figure out just how much of a cloud hangs over its proposed convention centre.

SkyCity had offered to build the $350 million national convention centre in return for the Government allowing it to expand its casino operation - including increasing the number of pokie machines.

But the deal's now subject to an investigation by the Auditor General's office, which will look into the processes around negotiations, including how proposals to build the centre were sought, and dealt with.

SkyCity welcomes the inquiry, and says it will fully co-operate in what it perceives has been a competitive selection process.

But investors don't appear to be as convinced, and the company's share price fell almost 3.5% on Wednesday.

Craigs Investment Partners investment adviser Jennifer Morton says the market was reacting to what it saw as negative news.

"The market will look at what is potentially a negative announcement and that will have an immediate affect on the share price ... the question becomes whether that is a lasting effect or whether it's just a short term impact".

She says analysts will try and predict what this will mean for the company in the medium term and whether it will have any effect on its earnings potential.

"So it becomes a bit of an immediate emotional reaction and then logic prevails and the market decides what impact it really does have on the value of the company".

Shares in SkyCity fell 12 cents to $3.41 on Wednesday.