Mykonos holding the ace?
Finweek
23 July 2010

Marc Hasenfuss

The market made no definitive pronouncements on proposals last week by the Western Cape Gambling and Betting Board to review the exclusivity of the Cape Town casino licence. Certainly, shares in Sun International – which holds the sole Cape Town casino licence in the form of GrandWest – didn’t plunge precipitously. Shares in HCI – the controlling shareholder of Tsogo Sun, which holds no fewer than three Western Cape casino licences – barely firmed.

The up-tick in the share price of Trematon – which holds a significant minority stake in the Tsogo Sun-operated Mykonos casino – was hardly significant.

That all might suggest there’s still a long way to go in the proposals to allow one of the four Western Cape licences – Caledon, Mykonos, Worcester and The Garden Route – to shift into Cape Town. Indeed, Sun International has already indicated it would challenge the proposals that would effectively allow one of the four provincial casinos to move into Cape Town itself.

The proposals aren’t entirely surprising. Steven Joffe, CEO of Gold Reef Resorts (GRR) – which is now being merged into Tsogo – had last year already raised the possibility of shifting the Mykonos casino licence closer to Cape Town. We must also remember GrandWest’s 10-year exclusivity period in the Cape Town metropole runs out this year.

But it’s not only Sun International that will potentially suffer from extra competition for its GrandWest Casino, the most profitable venue in the group’s portfolio. Community-based empowerment group Grand Parade Investments – which holds around 29% of SunWest (GrandWest’s holding company) – could also take some pain.

Presuming Sun International is unlikely to be allowed two licences in the Cape Town metropole (which rules out any thoughts of shifting the Worcester casino licence) it would seem the obvious candidate to shift its licence to the Mother City would be Tsogo/GRR’s Mykonos casino.

While Tsogo/GRR have three licences in Cape Town, it’s the relative lack of infrastructural development around the Mykonos Casino that probably makes the West Coast gaming licence the most convenient to move. Although profitable, Mykonos has always been vulnerable to economic downturns, being situated in an area where employment opportunities aren’t plentiful.

The Caledon Casino is attached to the Caledon Spa and is in the process of securing its tenure by setting up a golf course. The Garden Route Casino enjoys a profitable niche, with virtually no competition (conveniently situated half way between Port Elizabeth and Cape Town).

Tsogo, after the merger with GRR, will certainly not lack the capacity to fund a major casino development – not with shareholders such as HCI and SABMiller on board.

Although it’s early days yet, speculation has already turned to possible venues for a new Cape Town casino – ranging from the fanciful (the Soccer World Cup stadium) to the practical (the site of the soon to be demolished cooling towers).

And what odds on former Sun International supremo Sol Kerzner becoming involved? Kerzner’s One & Only Hotel on the Cape Town Waterfront would be an inspired venue for pulling in the high rollers and well-heeled tourists… something the Western Cape gaming authorities have already stressed.

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