Crown Resorts Limited

CWN Details

Key Appointments Since the FY21-End: Crown Resorts Limited (ASX: CWN) is an entertainment firm owning and operating multiple integrated resorts. Its core segments include- Crown Sydney, Crown Perth, Crown Melbourne, Crown Aspinalls, and Wagering & Online.

• Anne Ward was appointed as a Director of Crown effectively from 13 January 2022, after the grant of requisite regulatory approvals.
• Bronwyn Weir has been appointed as the new Group Company Secretary of Crown subject to the grant of regulatory approvals. Meanwhile, Mr. Alan McGregor will serve as the Interim Company Secretary.
• Ziggy Switkowski AO was elected as the new Chairman of the Crown Board on 1 December 2021 and appointed as a non-executive director of Crown after the receipt of requisite approvals.

Revised Proposal: In a recent update, CWN informed investors of receiving a revised proposal (non-binding) from Blackstone Inc. to purchase 100% shares of CWN in a scheme of arrangement at ~A$13.10 cash per share. The previous offer was extended at ~A$12.50 cash per share as declared on 19 November 2021. In the interest of its shareholders and after seeking legal and financial advice, the Board considers engaging with Blackstone (on a non-exclusive basis) to negotiate the terms for an implementation agreement to finalise a binding offer.

Investor Presentation Highlights: In a recently held investor briefing on 13 December 2021, CWN provided the fooling business update:

• Crown Residencies Revenue: CWN reported gross sales and pre-sale commitments (including GST) of over ~$1.1 billion and constituting more than ~85% of all apartments as of 30 November 2021. The net sales proceed post GST amounted to ~$925 million.
• Completed on Budget: The construction of the Crown Sydney project is Currently, gaming areas have been opened on a staged basis depending on the present staffing levels and pending a decision of suitability by the regulators to open a new gaming floor.
• Crown Melbourne: Improving business trends are being witnessed as restrictions have relaxed. The main floor gaming revenue stands at ~75% and non-gaming revenue at ~65% of pre-COVID levels over the two weeks ended 5 December 2021.
• Crown Perth: The demand for non-gaming activities is robust especially on weekends, aided by the leisure market.
• Crown Sydney: The non-gaming operations were reopened on 11 October 2021. The hotel occupancy is reported to progressively improve since the restoration of operations averaging ~40% since mid-November. The demand for F&B venues is robust and exceeds the average spend expectations.
• Obtained Funding: CWN has obtained ~$150 million unsecured debt facility from a domestic industry superannuation fund.

Key Financials, Highlights; (Analysis by Kalkine Group)

Key Risks: The hospitality industry continues to witness the COVID-19 impacts of limited staff capacity and operations. The lower customer visitation due to restrictions on travel continues to pose risk to the financial performance.

Outlook:

• CWN expects to receive ~$325 million net sale proceeds from its Crown Residencies by 30 June 2022, subject to the impact of COVID-19 disruptions.
• CWN is engaging in talks with the regulators to open a gaming floor early in 2022 and plans to hire more gaming related staff as it receives a go-ahead for full commencement of gaming.
• The company is proactively engaging with creditors to offer additional financial flexibility. Given a modification of the current financing arrangements with the lenders, CWN has decided not to declare or pay dividends for 1HFY22.
• CWN has reopened all its three (3) resorts in Australia on a staged basis and expects to witness improvement in the economic activity as the COVID-19 restrictions ease down.
• The company has a comparatively low gearing level, and it expects to further deleverage from additional sales of the Crown Sydney apartments.

Valuation Methodology: EV/Sales Multiple Based Relative Valuation (Illustrative)

Source: Analysis by Kalkine Group

*% Premium/(Discount) is based on our assessment of the company’s NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

Stock Recommendation: The stock of CWN gave a positive return of ~39.37% in the past six months and a positive return of ~23.96% in the past year months. The stock is currently trading towards its 52-weeks’ high level of $13.320. The stock of CWN has a support level of ~$10.70 and a resistance level of ~$14.60. The stock has been valued using the Enterprise Value to Sales based illustrative relative valuation method and arrived at a target price with a correction of a single high digit (in % terms). The company might trade at a slight discount than its peers’ median EV/Sales multiple, considering the net loss in FY21, persistent risk of COVID-19 & limited gaming operations, uptick in the debt-to-equity ratio, and decision to not declare dividends for 1HFY22. For this purpose of valuation, few peers like Aristocrat Leisure Ltd (ASX: ALL), Corporate Travel Management Ltd (ASX: CTD), Jumbo Interactive Ltd (ASX: JIN) have been considered. Considering the high trading levels, decent returns in the past months, the takeover proposal from Blackstone, the indicative downside in valuation, and associated key business risks, we suggest investors to book profit and give a ‘Sell’ rating on the stock at the current market price of $12.170, as of 28 January 2022, 12:14 PM (GMT+10), Sydney, Eastern Australia.

CWN Daily Technical Chart, Data Source: REFINITIV  

WAM Leaders Limited

WLE Details

Investment Highlights from December 2021: WAM Leaders Limited (ASX: WLE) is an investment firm that strives to provide capital growth and a fully franked dividend stream to investors. The investment activities of the firm are undertaken by WAM (Wilson Asset Management).

• The NTA per share after tax of WLE increased from ~139.41 cents per share (cps) in November 2021 to ~142.34 cents per share (cps) in December 2021.
• The WLE’s investment portfolio registered an increase of ~15.4% since inception in May 2016 compared to the S&P /ASX 200 Accumulation Index performance of ~10.1%.
• In December 2021, WLE increased its portfolio exposure in the already held gold stocks – Newcrest Mining Limited (ASX: NCM), and Evolution Mining Limited (ASX: EVN) to mitigate the impact of share price weakness in November 2021 and hedge from the increased market volatility in the New Year.

Business Update from the AGM 2021 Presentation:

• On 22 November 2021, the stock price of WLE was trading at 3.0% premium to NTA.
• WLE has paid ~27.15 cps in fully franked dividends to shareholders since its inception (May 2016).
• The investment portfolio rose by 6.4% on a year-to-date basis to 31 October 2021 surpassing the S&P /ASX 200 Accumulation Index performance by 4.8%.
• In August 2021, WLE undertook an Entitlement offer and share placement to raise over ~$277.2 million which led to an increase in the gross assets to over ~$1.5 billion.
• In FY21, WLE positioned its portfolio in favour of selected stocks across financials, energy, consumer discretionary, etc. which have the potential to recover from the economic crisis. WLE holds ~65 equity positions across its investment portfolio as of 31 October 2021.

History of Fully Franked Dividends; (Analysis by Kalkine Group)

Key Risks: The company faces financial risks, macroeconomic policy changes, equity market volatility, and regulatory concerns.

Outlook:

• WLE guides an annualised fully franked dividend yield of ~5.5% and dividend of ~4.0 cps for 1HFY22 (up 14.3% on 1HFY21).
• WLE remains focused on investing in large cap companies with robust fundamentals and cashflow generative potential.

Technical Analysis: On a daily chart, WLE stock prices are sustaining below the falling trend line resistance level at AUD 1.50 and facing the resistance of the same. The momentum oscillator RSI (14-period) is trading at ~40.29 level, indicating bullish momentum. Moreover, prices are trading below the trend-following indicators 21-period SMA and 50-period SMA, which may act as a resistance levels. An important support level for the stock is placed at AUD 1.35 while the key resistance level is placed at AUD 1.50.

Stock Recommendation: The stock of WLE gave a positive return of ~5.52% in the past year. The stock has a 52-weeks’ low level of $1.340 and a high level of $1.602. The stock of WLE has a support level of ~$1.35 and a resistance level of ~$1.50. Considering the decent returns in the past year, technical levels given below, and associated key business risks, we suggest investors to book profit and give a ‘Sell’ rating on the stock at the current market price of $1.425, as of 28 January 2022, 12:55 PM (GMT+10), Sydney, Eastern Australia.

WLE Daily Technical Chart, Data Source: REFINITIV  

Note 1: The reference data in this report has been partly sourced from REFINITIV.

Note 2: Investment decision should be made depending on the investors’ appetite on upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the Valuation has been achieved and subject to the factors discussed above.

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