Tsogo builds a place in the sun

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Banele Ginindza

Punters must have read Marcel von Aulock’s script before the launch on Thursday of Sky, the resurrected conference facility atop the Maharani tower on Durban’s golden mile.

The healthy feeding in the tens of thousands on Tsogo Sun’s stock grew to over 1.7 million, but the frenzy eased to close the week at a sedate pace closer to 100 000.

All the while, the share price gained little morsels around the R25 mark. Rubbing against the grain of conservative resource courtship in an environment where the consumer faces rising regulatory and fiscal pulls on his strained budget, Tsogo Sun is acquiring, expanding and consolidating.

Sky is part of R3 billion spent so far from a R6bn budget. Next up is an R1.8bn expansion of the Suncoast development on the Durban beachfront, which will include a destination mall, restaurants, roof-top pools, a 2 000-seater multipurpose venue and casino floor expansions.

Von Aulock, Tsogo Sun’s chief executive, outlined the combination of astute shareholders (SA Breweries and Hosken Consolidated), a long-term view of trends, confident risk taking, industry expertise as well as intimate knowledge of its customer.

On the hospitality front, Tsogo Sun armwrestles with the likes of The Don Group, City Lodge group and IFA Hotels and Resorts. Gaming is contested with Sun International and Phumelela Gaming and Leisure.

Von Aulock said Durban was re-emerging as an important destination for conferencing and leisure, and Tsogo Sun was making it the anchor of its plans. The group was throwing money – lots of it – at its challenges, with good returns.

“Its a lot of capex but it does offer good returns, we have seen a 20 percent increase on our numbers up to September. If we are wrong, we are merely too early,” he said.

He was confident the weaker rand would offer low-hanging fruit down the road.

“These sorts of effects take a little time, tourists don’t just pack their suitcases at the news,” he said, emphasising the importance of consolidation for the local market.

“The pessimism is not unjustified but it is short-term focused. If you take a 20-year view, things look okay.”

Tsogo Sun’s low debt enables higher leverage.

Other projects are a R560 million development of the Silverstar Casino in Gauteng expected to be completed by August this year. Gold Reef City is getting a R630m facelift.

The share ended 1.01 percent higher at R25.91 on Friday.

Banele Ginindza was in Durban as a guest of Tsogo Sun.


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