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SUN SEES BINGO AS THREAT TO GROWTH

CASINO giant Sun International, which is in the throes of increasing its exposure to limited payout machine (LPM) gambling, has expressed reservations about the burgeoning electronic bingo terminal (EBT) segment.

EBTs and LPMs offer punters smaller bets and smaller possible payouts than highly profitable bricks and mortar casinos. But, unlike urban-based casinos, these alternative gaming offerings can be rolled out quickly with far less development capital and without hefty maintenance expenditure.

LPMs are prevalent in pubs and restaurants, but EBTs operate as stand-alone sites and are referred to as mini-casinos. The main EBT and LPM players are Niveus, controlled by Hosken Consolidated Investments (HCI), Grand Parade Investments (GPI) and the RECM & Calibre aligned Gold Rush.

Writing in Sun’s annual report released last week, CEO Graeme Stephens said the company recognised that EBTs had a place in the industry if responsibly rolled out in areas that did not have access to traditional casinos. He said Limpopo offered such an opportunity, adding that Sun International believed EBTs did represent an opportunity for growth. But Mr Stephens said there were strong objections to situations where EBTs were developed within Sun’s “catchment areas”.

“This is against the promise of the casino licence exclusivity for which we bid and paid.”

Sun’s major casinos include GrandWest in Cape Town, Carnival City in Gauteng, Sibaya in KwaZulu-Natal and the Boardwalk in Port Elizabeth.

The firm recently blamed increased competition from EBTs for the poor performance of its Morula casino, which is now being relocated to a more central location in Menlyn.

Mr Stephens said EBTs placed in the firm’s catchment areas cannibalised existing businesses and undermined investment. He said the situation at Boardwalk strongly demonstrated the point.

“We recently invested R1bn into an expansion of the property, but have received no return on investment as a direct consequence of the licensing of four EBT operations in our catchment areas.”

There is uncertainty around the status and rollout of EBTs in the various provinces.

HCI — which also controls Tsogo Sun — noted in a recent annual report that while potential returns in the gaming sector remained good, the risk of regulatory interference and uncertainty had increased.

HCI CEO Johnny Copelyn said recent statements from the Department of Trade and Industry were not investment friendly for the EBT industry and reflected “a fixation with legalised gambling when illegal gambling is growing at an unprecedented rate”. He said the department incorrectly believed gaming outside formal casinos was more harmful to society and that the investment by casino operators needed to be protected.

Sun, however, is not completely shunning the alternative gaming offerings and has already made inroads into the LPM sector by acquiring a first tranche stake of 25.1% in GPI Slots from GPI late last year.

Mr Stephens said the LPM business had managed strong growth relative to the core casino business. He said the firm had now exercised its call option to increase the shareholding in GPI Slots to 50.1% after Competition Commission approval was granted last month.

“There is one further tranche of 20% over which we have a call option exercisable in 2016 and this will take us to our intended 70% ownership.”

In recent years, Sun International has also acquired substantial investments in Latin America that were recently consolidated via the recent merger with casino operator Dreams. But recently Sun bid to strengthen its local hand by tilting at a takeover of Peermont, the owner of Emperors Palace.

Source: BDLive – Marc Hasenfuss