Crown Resorts Limited

CWN announces interest payment: Crown Resorts Limited (ASX: CWN) is an Australian listed entertainment group with the presence in specific sectors such as tourism, employment, training, and social responsibility programs. The group has recently announced its interest payment of AUD 1.470 with interest rate of 5.85 % per annum for CWNHB - HYBRID 3-BBSW+4.00% 23-04-75 SUB CUM RED T-07-21 and it will be paid on June 14, 2019 with the record date of June 6, 2019 and ex-date of June 5, 2019.Additionally, the Board of Directors declared an interim dividend of 30 cents per share with payment date on April 4, 2019 and record date on March 21, 2019.

Moreover, recently its proposed Queensbridge Project with a 50/50 JV between Crown and the Schiavello Group, could not obtain the requisite financing arrangements. Therefore, an extension to the commencement date has been denied by the Victorian Government.


H1FY19 Group Cash-Flow (Source: Company Reports)

On the financial front, the company in its H1FY19 performance has reported a decrease in its revenue from operations by 7.3% PCP to $1,478 Mn. The normalized net profit for the company stood at $193.6 million an increase by 2.5% on the prior corresponding period. The normalized revenue however for Australian resorts decreased by 1.2% PCP on the back of a decrease in its VIP program play turnover primarily, by 12.2% on PCP to $19.9 Bn.

The EBITDA margin for the group in 1H FY19 stood at 27.5% better than the industry median of 23.3%. Its interest coverage ratio in H1FY19 stood at 26.6x better than the minimum level of 2.5x which implies a strong debt servicing position by the company. The leverage ratio of the company in H1FY19 stood at 0.9x lesser than the maximum level of 5.0x implying the company is less relying on external debt.

Work-in-progress: Going forward, the Crown Sydney Project is scheduled for the completion in the first half of the calendar year 2021. The total gross project cost is expected to be approximately $2.2 billion.
Stock Recommendation: CWN’s share generated a positive YTD return of 1.11%. Hence, considering the better EBITDA margin than industry median coupled with a positive outlook ahead, we reiterate our “Hold” position on stock at the current market price of $11.790 (down 0.338% on March 19, 2019).
 

Spark Infrastructure Group

Higher net operating cash flow against prior period:Spark Infrastructure Group (ASX: SKI) in its FY2018 result reported an increase in its adjusted EBITDA by 4.8% pcp to $825.4 Mn. It was driven by continued cost efficiencies and growth in both the regulated and unregulated businesses. Its standalone net operating cash flow increased by 8.5% pcp to $290.2 Mn, due to 7.3% higher cash distributions from investment businesses. Among the key ratios, the current ratio stood at 2.34x in FY18, increase by15.3% Y-o-Y, and it is above the industry median of 0.84x.

The Board of Directors declared a final distribution of 8 cps for FY2018 with payment date on March 15, 2019 and record date on March 6, 2019. The final distribution comprised 3.55 cps interest on Loan Notes for the period and 4.45 cps capital distribution. This summarized a total distribution payment of 16 cents per share for the full year which is in-line with the management guidance.

Recently, the company stated that one of its substantial holders, Investors Mutual Limited has cut down its voting power in the company from the erstwhile 6.12% to the current 5.02%.


FY2018 Financial Metrics (Source: Company Reports)

What to expect from the company: The company aims to invest wisely in organic growth across regulated and unregulated opportunities as per its Value Enhance strategy and maintain efficient and prudent capital structures of its electricity network businesses. However, it is strongly determined to grow and diversify its portfolio through acquisitions, and by building sustainable businesses arising out of the technology.

Stock Recommendation: SKI’s share generated a positive YTD return of 2.76%. Its annual dividend yield was reported at 7.17% which takes it to the list among top dividend-paying stocks on ASX. On the valuation front, its PB multiple stands at 2.08x which is almost in line with the industry median of 2.07x. However, with the improving operating cash flows as compared to the prior year, coupled with factors like decent current ratio and improved adjusted EBITDA in FY18, we give a “Hold” rating on the stock at the current market price of $2.230.
 

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