Crown Limited (CWN) FY12 Results Impress


Weekly Buy Recommendations: Crown (CWN)Crown (CWN) manages a variety of gaming and entertainment facilities, including, bars, restaurants, nightclubs, cinemas and retail outlets. It also develops hotels and conference center facilities.

The company wholly owns and operates two integrated resorts; the Crown Entertainment Complex in Melbourne and Burswood Entertainment Complex in Perth. Mr James Packer currently owns a 48.1% stake in the group.

CWN also has an interest in several different projects including: 33.6% interest in Melco Crown entertainment, which is based in Macau, 50% interest in online gambling site Betfair, 24.5% interest in Cannery Casino Resorts in the US, 50% interest in Aspers Holdings (UK) which operates three regional casinos in Newcastle Swansea and Northampton, 10% interest in Echo Entertainment.

FY12 Results

CWN’s FY12 results continued to impress against the backdrop of a challenging consumer environment. The company reported normalised FY12 NPAT of $415.0 million, which was an increase of 22% on the prior corresponding year.

CWN’s Australian casinos reported revenue growth of 8.9% to $2,630.1 million, with normalised EBITDA up 5.1% to $736.9 million. A breakdown of the two main facilities showed that Crown Melbourne’s normalised EBITDA grew 1% to $510.6 million, whilst Burswood EBITDA gained 15.9% to $226.3 million.

The company declared a final dividend of 19 cents, which equates to a healthy yield of over 3.5%.

Six-star hotel

Today CWN announced that it had had received stage one approval from the NSW government to build a new $1 billion six-star hotel resort with VIP-only gaming facilities at Sydney’s Barangaroo.

This is stage one of a three stage process and if approved would be Australia’s first six-star Casino. This is an interesting move for CWN as it had been previously thought that it would try to take over Sydney’s Echo Entertainment (EGP).

The whole development faces an uphill battle, with EGP currently holding the only casino licence in Sydney, and an exclusivity agreement in place until November 14, 2019.

CWN will have a casino business in Sydney, Mr Packer has made this abundantly clear in the past. The questions that remain are when it will happen and whether it will be a takeover of EGP or a new complex all together.

The new complex won’t happen until the exclusivity agreement expires as the project would be unviable without at least a VIP gaming facility.

Outlook

CWN”s results speak for themselves, they were able to grow earnings in a tough consumer environment. The purchase of EGP could still be CWN’s ultimate plan, as it has applied to increase its stake in the company to 25%.

Whilst a new gaming facility may be a longer-term plan for CWN, we see it more as a back-up if it can’t acquire EGP. There is also a possibility that the whole plan is a move to scare EGP into selling as the increased completion in the VIP segment may be too damaging to EGP’s earnings.

Overall we see any move that CWN makes into the Sydney’s casino market as good one.

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