Crown Resorts Limited
Strong revenue growth coupled with cash improvement:Crown Resorts Limited (ASX: CWN) is one of Australia’s largest entertainment groups and contributes its services into several sectors such as Australian tourism, employment, training and social responsibility programs, etc. The core business of the group is into the resort sector, and it is a mid-cap company with the market capitalization of circa $8.14 Bn as of January 18, 2019. It also operates in its fully owned licenced casino in London.
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Group Performance (Source: Company Reports)
On the analysis front, topline grew by 4.5% to $3,493.0 million in FY18 over the prior year. It was mainly driven by the revenue from the core businesses. Normalized EBITDA stood at $878.3 million in FY18, up 6.1% Y-O-Y. It reported an EBITDA margin, operating margin and Net margin of 23.5%, 23.5% and 16.4% respectively in FY18 as compared to the industry median of 21.0%, 15.2% and 10.5% respectively. The asset turnover ratio improved Y-O-Y significantly by 9.1% on the back of improved sales and stood at 0.42x in FY18 compared to 0.38x in FY17. The company has an improved current ratio of 2.46x in FY18, increased by 35.3% approximately, driven by lower short-term interest-bearing loans and borrowings. The cash & cash equivalents improved on the back of improved net CFO which stood at $731.7 million in FY18 as compared to $465.7 million in FY17. CFO improved primarily because of lower borrowing costs and higher receipts from customers.
Increased Focus Towards Existing Businesses: As of now, the company focuses to improve the underlying performance of its existing businesses and develop the projects which are in the pipeline. It focuses on the core Australian operations and development projects which support the company’ growth momentum moving forward. Moreover, it would also work for improving the returns of the shareholders. Besides this, the group also disclosed its interest payment of AUD 1.48 with interest rate of 6.0166 % per annum for CWNHB - HYBRID 3-BBSW+4.00% 23-04-75 SUB CUM RED T-07-21 and it will be paid on March 14, 2019 with the record date of March 06, 2019 and ex-date of March 05, 2019. Meanwhile, the share has fallen 9.93% in the past three months as at January 18, 2019 and is trading close to lower level. On the back of higher revenue growth Y-O-Y, robust balance sheet and with improvement in cash, we expect that the company will deliver decent performance in FY19. Hence, we maintain our “Hold” recommendation on the stock at current price of $11.88 (down 1.165% on January 18, 2019).
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