Company Overview - Crown Resorts Limited is an Australia-based company engaged in the businesses of luxury accommodation, dining, conference, gaming facilities and retail options. The Company operates in three segments: Crown Melbourne, Crown Perth and Aspinall’s Club. Crown Melbourne and Crown Perth offer customers a range of dining experiences and gaming facilities. Crown Aspinall’s is a London casino. It is the five licensed high-end casinos in London’s prime West End entertainment district. Crown Resorts has plans to develop and operate an iconic six-star hotel resort, including VIP gaming facilities, at Barangaroo South, Sydney. Crown Perth sponsored many local events, cultural activities and other community-based programs throughout the year, including providing the venue for the Ronald MacDonald Ball, the Royal Queensbury Challenge and Styleaid.
Analysis - Crown Resorts Ltd’s (ASX: CWN) joint venture in Macau, Melco Crown Entertainment Ltd (NASDAQ:MPEL), in which CWN holds an interest of 34.3%, recently posted disappointing results for first quarter of 2015. Melco Crown’s net revenues declined 22% to US$1,054.3 million, as compared to US$1,357.3 million for the first quarter of 2014 due to decrease in rolling chip and mass market table games revenues. Adjusted property EBITDA posted a year-over-year decrease of 35% to US$253.3 million from US$387.5 million in the comparable period of last year. Meanwhile, net income dropped to US$60.6 million in first quarter of 2015 from US$239.5 million in first quarter 2014 due to US$36.8 million non-controlling interests from Studio City and City of Dreams Manila.
Melco Crown Entertainment Limited (Source: Company Reports)
City of Dreams revenues saw a year on year decrease of 33.3% to US$805.9 million, impacted by lower rolling chip volume and mass market table games revenues in this segment, which declined by 82.2% and 10% respectively. In addition, gaming machine handle and total non-gaming revenue at City of Dreams also posted a year over year decrease of 16.6% and 5.5% to US$1,242.0 million and US$66.7 million respectively. Altira Macau revenues fell to US$148.7 million, as compared to US$229.8 million for the same period earlier year, while adjusted EBITDA plunged 80% in year over year terms to US$6.8 million. Rolling chip volume, mass market table games and non-gaming revenues for this segment declined by 26.7%, 21.8% and 9.6% respectively, as compared to the same period of previous year. For Mocha Clubs segment, revenues decreased to US$34.9 million from US$39.5 million in same period of 2014, while adjusted EBITDA fell 26.5% to US$8.3 million.
City of Dreams Manila’s operations began in the end of 2014, followed by a grand opening during the first quarter. Total net revenue for the quarter reached US$52.7 million, while adjusted EBITDA stood at US$2.9 million. Coming to the segment wise revenue breakup, rolling chip volume, mass market table games, gaming machine handle and non-gaming revenue generated US$185.5 million, US$101.8 million, US$385.7 million and US$20.2 million respectively.Melco Crown’s first quarter cash balance was US$3.2 billion, which includes US$1.6 billion of restricted cash mainly from Studio City. Meanwhile the company’s capital expenditures for the quarter was US$456.2 million, primarily used for Studio City, City of Dreams Manila and for City of Dreams projects. Meanwhile total debt at the end of the quarter for the company stood at US$3.8 billion. Further, Melco Crown announced a quarterly dividend of $0.0112 per ordinary share for the first quarter of 2015, to the shareholders holding the stock as on 26 May 2015. The company will pay the dividend on 5 June 2015. Moreover, recently the company’s City of Dreams Manila in Philippines got the regular gaming license approval from the Philippine Amusement and Gaming Corporation (PAGCOR) till 11 July 2033. Lately, the company announced that it is opening Macau’s first megaclub at Studio City along with Pacha, as a part of its ongoing strategy to diversify in leisure segment. Melco crown’s revenues have been decreasing since June 2014 due to slowdown in China’s economic growth, visa restrictions, smoking bans and the Chinese government’s pressure on illegal money transfers. The stock of Melco Crown declined by 43.3% over the last 52 weeks, and posted a negative year to date returns of 25.5%.
Crown Resorts Notes I and Notes II comparison table (Source: Company Reports)
With regards to the CWN highlights and particularly, as per the CWN’s Subordinated NotesII updates, the company recently raised over $630 million at an issue price of $100 per Note II under offer.
Due to the growing pressure for CWN’s joint venture interest, Melco crown in Asia region, CWN is seeking efforts to offset the pressure by focusing on the United States and Australia regions including Sydney, Melbourne and Las Vegas.
As indicated earlier, CWN and Schiavello Group have been negotiating to develop a luxury five star hotel and apartment complex, near the Crown Melbourne complex. CWN invested $50 million on this land for 50% share in the end of last year, while the remaining 50% is held by Schiavello Group. CWN will manage the hotel, while Schiavello will acquire the office and showroom area in the potential complex. Meanwhile, there will not be any gaming operations. CWN’s subsidiary acquired a 34.6 acre land in Las Vegas Boulevard during August of last year. While the development plans have not been finalized, the company intends to make an equity investment of over a range of $400 million-$500 million, wherein the estimated total project budget value is around the range of $1.6 billion-$1.9 billion. Meanwhile, upon request from Queensland Government for detailed proposals on Queen’s Wharf Brisbane site, CWN and Greenland Holdings proposed an intention to develop a luxury integrated resort with a six star hotel and casino, during October 2014. This joint venture bid has been under assessment by the Queensland Government.
Crown Resorts Worldwide Presence (Source: Company Reports)
In Sydney, the company has reported its plan on building a six star hotel resort at Barangaroo South, Sydney. Crown Sydney will comprise VIP gaming facilities, over 350 luxury hotel rooms and suites, signature restaurants, luxury apartments, bars, pool and spa facilities, conference rooms and luxury retail outlets. The Independent Liquor and Gaming Authority at New South Wales approved a restricted gaming license on 8 July 2014.
Debt Structure (Source: Company Reports)
Overall, the company has indicated to spend around $2.8 billion of capital expenditure on its properties in Melbourne and Perth during fiscal year 2010 to fiscal year 2017.
Development Project_Queen’s Wharf Brisbane Proposal (Source: Company Reports)
The stock of CWN delivered year to date returns of 3.5%, but posted a decline of 8.8% in the last twelve weeks due to weaker than expected performance of its Asia’s joint Venture Melco Crown. However, we believe that the company has a potential for long term growth, driven by the company’s assets in the United States and Australia. MPEL is still considered to be an outperformer among its Macau companions despite the slow junket driven VIP in City of Dreams Manila. This is given the cost saving efforts and the associated dividends. The cumulative effort on cost reductions and emphasis on developing non-gaming attractions is thought to enable Studio City table allocations before opening in third quarter of 2015. There is for sure softness in MPEL fundamentals, however, there is a likelihood that new casinos based on additional tables and hotel rooms would help combat the low demand to some extent. Further, Crown Melbourne and Perth seem to have earnings growth across the main gaming floor with strong VIP earnings.
CWN Daily Chart (Source - Thomson Reuters)
Based on the foregoing we give a BUY recommendation for this stock at the current price of $12.88.
AU
CA
NZ
UK
US
IND
.png)
.png)
.png)
Please wait processing your request...