Reef Casino Trust

Reef Casino Trust is a good share at the moment if you look at it fundamentally.


Comapny profile
Reef Casino Trust operates in one business segment, that of property ownership and rental in the tourism, leisure and gaming industry, and in one geographical segment, Australia. It is the owner and lessor of the Reef Hotel Casino Complex. The Trust's rental income is derived from the Reef Hotel Casino. Its key businesses include electronic gaming machines, table gaming, hotel room accommodation, and food and beverage operations. During the year ended December 31, 2005, Reef Hotel Casino attracted 1.3 million visitors, of which 25% are from overseas. Its casino's main overseas markets are Japan, South East Asia (mainly Singapore and Malaysia) and China including Hong Kong. In July 2005, it opened up Velvet Rope showroom and Velvet Underground nightclub.

Analysis

Its sitting on a PE level of 4. Yes thats right a measly 4 times earnings. So we would ahve thought this company had been in a decline with the share price. Well thats wrong too. It has climbed continuously for the last 4 years.

They have had 7 years on continual earnings and profit growth. The distributions are set at 100% (more for the next 4 years).

They are increasing vistor numbers, revenue, EBITDA, earnings, profit, etc, etc, etc.

Risks

There are 2 major risks to this stock.

The first is the debt to equity is at 310%. This is way too high. They can cover the interest 9 times but it is still a bit high for my liking. This does need to be looked into as it is not a loan but the liability is a set of interest bearing units. At this stage I do not have all the information so I will assume the figure of 310%. I will be chasing this up though as it may be that this figure is not as bad as it looks.

The second is a lot of ethical funds won't invest in them. This is both a risk and an opportunity. It is what has kept the stock at 4 times earnings.

This is a good stock if you are interested in a long term buy.

Good Luck.