Showing posts with label Crown Casino. Show all posts
Showing posts with label Crown Casino. Show all posts

Friday 23 September 2011

Hot stock: Crown (Australia): The odds are looking pretty good for Crown.

Hot stock: Crown
Greg Fraser
September 21, 2011


The odds are looking pretty good for Crown.

Crown is still the king of Australian casino businesses.

There is a high-stakes game being played out between Crown’s Melbourne and Perth casinos and Echo Entertainment Group’s newly renamed The Star Casino in Sydney.

Echo has spent $960 million on its upgrade but Crown will have spent almost $2.1 billion across its two casinos by the time everything is finished.


Crown has consistently upgraded its properties to avoid the dangerous ‘‘tired’’ tag that can easily sap patronage and earnings.

The company has always produced a nice mixture of gaming and non-gaming earnings that has become the norm for all casino resorts.

But the headlines usually focus on the glamour and mystique of the high rollers, who last year put about $40 billion on Crown’s gaming tables in Australia.

This lucrative business generated $486 million of revenue for Crown last financial year and should continue to contribute earnings growth following the latest incarnation of its private gaming suites.

Crown’s VIP customers come mostly from Asia, where there are an increasing number of fabulous gaming destinations to play, including Singapore and Macau. The latter is already the world’s largest gaming city, eclipsing Las Vegas in recent years.

Fortunately, Crown had the foresight to get an early seat at the Macau table, where it owns a one-third share in the listed Melco Crown Entertainment (MCE). MCE owns a casino licence and two large casinos, plus some options for growth. The Altira Macau is aimed at Asia’s junket players, while the much larger City of Dreams attracts both high rollers and the mostly Chinese mainland visitors now flocking to Macau for the chance to gamble legally.

Crown’s investments across all its properties will taper off after this year so its free cash-flow generation is about to take off. The timing is looking good, with the Macau business now full steam ahead and gaming activity in Australia steady despite the slow economy.

Price

At the current share price, just less than $8, investors are paying for the Australian casinos only and getting the Macau investments free when the whole package is really worth about $11. Crown’s major shareholder, James Packer, has been buying more stock recently and the company itself is conducting a $240 million share buyback.

The odds are looking good on this one.

Greg Fraser is an analyst at Fat Prophets.

Read more: http://www.watoday.com.au/money/investing/hot-stock-crown-20110920-1kj1z.html#ixzz1Yj7YfneJ