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Crown Resorts

The market has been worried about slowing rates of growth in Macau due to the clampdown corruption from the Chinese government. But the Australian casinos meanwhile have simply been getting on with things. Crown had become oversold in recent months and remains cheap as the new assets begin to contribute over the next two years.

VIP turnover almost doubled at CWN Melbourne in 1H15 with associated revenue increasing from $219m to $409m in 1H15.

EBITDA from Australian domestic casinos added $73m normalised EBITDA while all the focus has been on Macau which dipped $31m in contribution.

CWN’s Australian casinos lifted EBITDA by 21% to $478m cf EGP +31% to $261m (Star +37.5% to $183m). Sky City Entertainment Auckland EBITDA +3.1%.

No data on foot traffic through the doors on either group but safe to assume that both co.s have enjoyed better patronage if non-gaming rev a guide (CWN +2.4%, EGP -7.2%).

Casino operating costs another interesting comparison with CWN -2.1% while EGP +7.1%.

Who is more efficient?

EBITDA margin at CWN 27.7%, EGP 22.5%, SKC Akld 41.1%, Adelaide 15.5%

Casinos VIP

CWN has been whacked last year by the corruption clampdown out of China with consequent declines in VIP turnover more so than mass gaming turnover.

But the focus on Macau has caused investors to take eyes off the Australian casino properties which have performed strongly.

MPEL factors that will +vely impact this year:

  • City of Dreams 5th tower under construction
  • Studio City opens later in 2015
  • MCP Philippines opened in Feb15Group capex and debt both increased but the b/s remains robust, no change to credit rating etc. Lots of headroom.Queens Wharf proposal in Brisbane could depend on how the new Labor government sees the whole picture – affects EGP too.Construction at CWN Sydney is now prominent across the skyline and is on track towards 2019 opening and head-on comp with The Star in VIP.My valuation still sits at $16.70 based on very conservative 8x multiple for Aussie casinos and mkt value for MPEL – both should arguably be higher.Note I haven’t yet incorporated Betfair as fully owned subsidiary after completion of outstanding 50% but this is minor.A 5% lift in Melbourne and Perth FY15 EBITDA lifts valuation to $17.70.


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