Tsogo Sun Ltd (JSE: TSG / FRA: G5E): Africa’s Biggest Casino Operator is Getting Bigger

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Tsogo Sun Ltd (JSE: TSG / FRA: G5E) is South Africa’s largest hospitality company, the only casino, hotel and entertainment group in the top 100 companies of the JSE, and it’s Africa’s biggest casino operator. The Company recently reported earnings:

OVERVIEW:

  • Prior to 2011, Tsogo Sun Holdings owned and operated two divisions: Southern Sun Hotel Interests and Tsogo Sun. On 24 February 2011, Tsogo Sun Holdings concluded a merger with and reverse listing through Gold Reef Resorts. Since the unbundling of its business into separate hotels and gaming interests in June 2019, Southern Sun (JSE: SSU) and Tsogo Sun have been listed separately on the JSE (See: Southern Sun (JSE: SSU): Almost Normalcy for Southern Africa’s Leading Hospitality Stock).
  • Tsogo Sun is a premier hospitality group with a portfolio that encompasses casinos, hotels, event venues, theatres, restaurants, bars, a theme park, a bird garden and more. It has a significant presence in the gambling industry in South Africa, with premier casino and entertainment destinations, Galaxy Bingo sites, VSlots limited payout machines (“LPMs”), and bookmaker licenses. In addition, the group owns hotels, a theme park, theatres, cinemas, and conference facilities.
Casinos
Gaming
Hotels
Entertainment
  • The Key shareholder is Hosken Consolidated Investments Limited (JSE: HCI / OTCMKTS: HKCIF), a JSE listed investment holding company, which directly and indirectly owned 49.5% of the shares, excluding treasury shares. The Hosken Consolidated Investments (“HCI”) shareholding provides the bulk of the Broad-based Black Economic Empowerment (“B-BBEE”) ownership at group level.
  • Tsogo Sun Corporate History Video (YouTube) 12:54 Minutes – Feb 2014
    • A look back at the history of Southern Sun / Tsogo Sun.

RECENT FINANCIALS / NEWS:

  • Reviewed Financial results for the year ended 31 March 2023
    • With the cessation of the pension fund contribution holidays and longer hours of operation due to the lifting of COVID-19 regulations, remuneration costs have increased.
    • The cost of diesel and other consequential losses due to high levels of load shedding, eroded margins in the second half of the year.
    • As a result of unprecedented levels of load shedding, high fuel and food prices, and increased interest rates, revenue is expected to remain under pressure in the short term. What is of concern is whether generators can sustain the workload as the pressure of load shedding mounts. Preventative maintenance has been stepped up and the casinos have ordered generators with a combined cost of approximately R30 million. This is in order to prevent a complete shutdown in the event of equipment failure.
    • Stages 5 and 6 of load shedding impacted revenue, with customers being increasingly more reluctant to travel at night.
    • Significant positive net cash was generated by operations, with cash managed effectively.
    • A good reduction in finance costs was achieved, despite repurchase (repo) rate increases.
    • Regardless of all the negative impacts experienced, the group is in a strong financial position.
    • The management of all the hotels is now in-house and Tsogo Sun plans to improve and expand its hotel offering. The Silverstar hotel has been expanded from 43 to 55 rooms from April 2023 and a complete refurbishment of the two hotels at Gold Reef City Casino and Theme Park has been completed and includes new world class conference facilities. In addition, Tsogo Sun has taken up an approximate 10% shareholding in City Lodge (JSE: CLH / OTCMKTS: CTYLF).
    • Developments within the digital, online and technology space are progressing well, and the group envisages having more visibility in the market in this regard in the 2024 financial year. playTSOGO, the Tsogo Sun online betting platform, was launched in December 2022 with a unique and quality product offering. The expansion of betting libraries is underway, creating an exciting adventure in the Tsogo Sun online betting division.
Reviewed Financial results for the year ended 31 March 2023
  • Tsogo Sun snaps up 5% stake in City Lodge (IOL) May 2023
    • Africa’s biggest casino operator Tsogo Sun Gaming has become one of the top five investors in leading South African hotel chain City Lodge, with a 5% stake, share ownership data showed.
    • The stake, acquired by HSS Investments and Entertainment Holdings, two subsidiaries of Tsogo Sun Gaming, could herald the casino operator’s return to the hotel business, reversing its split into two separate entities – casinos and hotels – in 2019.
  • WATCH: Stock picks – Tsogo Sun Gaming & KAAP AGRI (Youtube) 2:48 Minutes (Business Day) November 2022
    • Jean Pierre Verster from Protea Capital Management chose Tsogo Sun Gaming as his stock pick of the day and Rowan Williams from Nitrogen Fund Managers chose KAAP AGRI.

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