Cutting Near Term Estimates for Sky City On Cost Pressures, but Fair Value Estimate Stands

We are lowering our fiscal 2014 and 2015 forecasts for Sky City to account for the significant disruptions to the Adelaide casino and some one-off costs incurred during the transformation program. The company is spending AUD 320 million to transform the Adelaide casino into an integrated gaming complex with a boutique five-star hotel, signature restaurants and a much improved gaming product. We continue to believe that Adelaide’s EBITDA will more than double to AUD 100 million in 2019 due to higher foot traffic, a lift in unit revenue per machine (due to significant premium gaming) and substantially lower electronic gaming machine, or EGM, taxes.