Smart money on Gold Reef takeover bid
Business Day
19 March 2007

Thom McLachlan

A 25% increase in headline earnings at gaming and leisure group Gold Reef Resorts may make the company an attractive prospect for a takeover, analysts say.

An analyst said the company’s size made it an easy target and that a recently released cautionary announcement made the likelihood stronger.

This was further fuelled by a statement by group CEO Steven Joffe that “additional local and international transaction possibilities further enhance the group’s prospects”.

The black-owned Mining Investment Company’s bid for Peermont, which knocked London’s Century Casino-led consortium out of the running, was also accepted by shareholders last Monday, leaving a gap in the market for the foreign company.

Gold Reef Resorts announced that net game wins were up 32% for the year to December boosting revenues to R1,5bn — a 30,2% increase. Group earnings before interest and tax increased 27,8% to R624m. Profit for the year was R254m, boosting headline earnings to 127,4c a share.

The group said it would make an announcement regarding dividends at the end of next month, once a black economic empowerment deal was finalised.

The group is similar in size to gaming group Peermont, which was made an offer by a London-based consortium led by Century Casinos, only to be outbid by black-owned Mining Investment Company in February.

Joffe said the group’s flagship Gold Reef City Casino had increased revenue by 14,4%.

Following an announcement last week of an empowerment deal that took black-owned equity in the company to 25,1%, just above the government minimum, the group said it would increase its stake in Western Cape’s Mykonos casino to 70,4%.

A strong provincial economy had made Mykonos Casino the group’s top growth performer, with earnings of R47m, it said.

In November, the group secured the last valuable gambling licence in Gauteng together with empowerment partners Akani Leisure Silverstar Holdings for its Silverstar casino.

Construction of the Silverstar complex started in August. The new facility was expected to reduce reliance on Gold Reef City and increase the company’s share of the lucrative Gauteng region market, financial officer Jarod Friedman said.

The R1,2bn casino is set to open in the first quarter of next year. Other gaming interests including the Golden Horse Casino in Pietermaritzburg, the Garden Route Casino and Free State-based Goldfields Casino, traded well, the group said.

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