Quite an eventful festive season break — even if I was stuck in Kommetjie with a home improvement to-do list as long and realistic as most election promises.
My wife got fixated on turning our outside cottage into a pastoral holiday let. When I reminded her that it was late in the season to be contemplating such grandiose schemes, she merely worked me harder. Having been the only pupil at Muir College to be asked — nay, told — to give up woodworking, things could have gone awry.
I thought I had done well until the locksmith arrived. He pointed out that the reason the door was jammed was that the blinds I had hung had been screwed right through the door and into the frame. Physically, the only damage incurred was a slight severing of the tip of my left thumb by a demonic power drill.
Our holiday guest, the unflappable financial journalist Larry Claasen, was probably not the perfect guinea pig to assess the possibility of a holiday rental enterprise. He is far too polite. We needed a Teutonic tirade about the shortcomings. Dear old Larry uttered not even a snide remark about the fact that his hastily improvised bathroom window latch was a corkscrew. When my wife finally noticed, I got corked out from a dizzy height …
Then there were the usual ecological challenges: horrendous mountain fires and sporadic raids by a small family of baboons, whose tight-knit intimacy rendered them slightly more lovable than the usual marauding troop. The holiday’s “thank goodness I wore the brown corduroy pants” moment came when I spied a snake coiled threateningly in the middle of our lounge floor. What we thought was a berg adder was in fact a harmless egg eater, which would have been nice to know before I strained a calf muscle jumping from couch to couch in panic.
A calm demeanour is also needed when contemplating gaming giant Sun International’s surprise takeover bid for smaller rival Peermont. I thought Sun — which has degeared markedly and looked set for considering a special dividend — might be content to pursue smaller acquisitions to build up its sports betting and online gaming interests. The obvious deal would be to buy the 30% stake it does not own in Sun Slots — a limited-payout, electronic bingo and sports/online wagering operation — from Grand Parade Investments.
That said, Peermont has a great asset in the Emperors Palace casino in Kempton Park. But it also owns a slew of smaller casinos in some far-flung areas. I understand the Peermont deal will take 12-15 months to conclude, which does give Sun ample time to degear further by selling smaller casinos and other noncore assets. Sam Sithole, the CEO of Value Capital Partners (a major investor in Sun) and a Sun board member, notes that being more prudent with capital spend can slash debt.
The Peermont deal seems retrogressive in terms of Sun’s push into online and sports betting — not to mention that bricks-and-mortar casinos are very much ex-growth
Still, the Peermont deal seems retrogressive in terms of Sun’s push into online and sports betting — not to mention that bricks-and-mortar casinos are very much ex-growth. Interestingly, the Peermont deal might end up being positive for Sun’s online and sports betting business. Instead of splurging on online/sports assets — which are bought at turnover multiples with negative cash flows and negative profits — Sun seems to be going the safer route of growing organically off its brands and customer database.
Sun has hired some highly respected industry experts to drive its sports betting and online gaming ambitions, a move that has already paid off — this part of its business has more than trebled in the past 12-18 months. More importantly, the sports betting and online gaming segment has moved from losses to potentially more than R200m in profits at the end of 2023. Sun will be hoping it can apply the same successful formula to Peermont’s online and sports business, PalaceBet (which I assume is still loss-making).
In terms of scale, Peermont will give Sun the chance to push profits from around R3.3bn to closer to R5bn of earnings before interest, taxes, depreciation and amortisation. On the Peermont side, Emperors Palace accounts for nearly R1bn of the almost R1.27bn in total group earnings. There are potential synergies with Sun’s casinos in the northern parts of South Africa, particularly the omnichannel offers to gaming clients. Clearly Emperors Palace is the asset Sun is really after. But would it keep properties such as the Frontier Inn in Bethlehem and Graceland in Secunda?
There are also casinos in Thohoyandou, Mahikeng, Burgersfort and Klerksdorp, as well as operations in Botswana. Could some of these smaller casinos be bundled together with Sun’s smaller casinos (Kimberley, Wellington and Polokwane) and sold off as a standalone gaming grouping? Would a couple of Sun’s bigger operations also be considered — perhaps the Boardwalk in Gqeberha and the Windmill in Bloemfontein? There should be some interesting shuffling in the year ahead.
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