The local casino sector is spinning slower these days as discretionary spending dries up, but diversified investment company RECM & Calibre (RAC) is betting its fast-growing alternative gaming subsidiary Goldrush is ready to list on the JSE.
RAC holds a 51% stake in Goldrush, which holds limited payout machines (LPMs), electronic bingo terminals (EBTs) and sports betting operations.
RAC’s year-to-end-March results, released on Tuesday, showed that in two years the value of the stake in Goldrush had more than doubled from R446m (at the end of March 2016) to R941m.
At financial year-end Goldrush represented a chunky 46% of RAC’s total assets of R2bn.
RAC executive director Jan van Niekerk said there was no need to raise fresh capital for Goldrush, but that a listing, which was always part of an agreement with the company’s management, would rather be a "price discovery event".
He said listing plans could be tabled at the end of 2018.
Alternative gaming assets have surprised punters with their profit prowess in the past five years. Listed gaming giants Sun International and Tsogo Sun have both advanced on the alternative gaming sector via the respective acquisitions of GrandSlots (now SunSlots) from Grand Parade Investments and Vukani and Galaxy from Niveus.
Van Niekerk said Goldrush was still subject to ongoing interest from potential suitors. "We get contacted about Gold-rush two or three times a year. But we are not sellers."
For the first time RAC also presented a more detailed report of Goldrush’s financial performance. Contrasting stagnant trading conditions in the local casino sector, Goldrush saw its turnover surge through the R1bn mark (2017: R747m). Sustainable earnings before interest, tax, depreciation, amortisation and rentals (Ebitdar) was R300m (R229m), reflecting a 30% margin that is comparable to smaller urban casinos.
RAC CEO Piet Viljoen said Goldrush was entrenching its position as the largest alternative gaming group in SA with 24 EBT sites, 1,671 LPMs and 28 sports betting shops.
He said Goldrush’s recent acquisition of Boss Gaming Group provided a kicker at bottom line. "This has so far turned out to be a very good transaction for Goldrush, as Boss contributed significantly to this year’s earnings, especially when compared to the price we paid."
Viljoen noted all Goldrush operations performed well, aside from the Pretoria EBT properties and one Johannesburg EBT property. He explained that the relocation of the Sun International casino licence from the Morula complex to the new Times Square casino at Menlyn Maine had affected Goldrush’s Atterbury and Kolonnade Bingo properties severely. "We have not seen any recovery from this impact as yet."
While the Gauteng market is constrained by additional competition, Goldrush looks set to cash in on a decision late in 2017 by the KwaZulu-Natal legislature to formally approve EBT operations in that province.
Aside from Goldrush, RAC’s other investments include a 28% stake in JSE-listed investment company Astoria (now subject to a takeover bid), a 90% stake in JB Private Equity (which controls JSE-listed Unicorn Capital Partners) and a 32% stake in diamond miner Trans Hex, as well as a hedge fund holding an array of undervalued companies.
Smaller interests include stakes in La Concorde (which holds the old KWV’s properties and art), private education business College SA, insurance company Conduit Capital and building supplies firm Distribution & Warehousing Network.
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