JOHANNESBURG, Feb 5 (Reuters) - Shares in Sun International South Africa Ltd (Sisa) rose on Friday, shruggin off a grim outlook on earnings after news that a key shareholder was in talks to sell its stake in the hotels and gambling firm.

The North West Development Corp (NWDC) said earlier it was in negotiations to dispose of its holding in

Sisa, an effective 28 percent, which it has to do before May 10 under gambling legislation.

Sisa, which until the 1996 Gambling Act had a monopoly on casino gaming in South Africa and whose assets include the Sun City leisure complex pop star Michael Jackson was rumoured to have his eye on, is to report half year earnings next Wednesday.

Analysts in general welcomed news of the proposed sale,which upped Sisa's shares by over four percent to 99 cents,saying it eased concerns that shares may flood onto the market.

"Everyone knew they (the NWDC) had to sell. As a last resort they may have sold into the market. It is a relief

that someone sees value and that the share overhang looks like it will be removed" an analyst said.

Over the past 2-1/2 years,Sisa's shares have lost nearly 80 percent of their value as the company has lost its

dominance of gaming revenue with the entry of new competitors.

Casino gambling was illegal in South Africa until the Gambling Act, although punters only had to drive to

nearby black homelands, a creation of the apartheid government, to find slot machines and roulette.