International edition
September 21, 2021

While a raft of US-based casino stocks fell, many analysts believe Crown is undervalued

Casino operator Crown loses us$ 6 billion

(Macau).- There are tough times ahead for the casino sector, where former media mogul James Packer now has the bulk of his investments. Crown Ltd has lost us$ 6 billion in value since last December and problems with new Chinese government restrictions on visitors to Macau.


hile there have been solid results so far this year for Crown’s Australian operations, the group’s offshore expansion plans appear less certain of delivering much growth. But analysts saw the results as better than rival Tabcorp’s and a solid foundation for the next year.

Crown CEO Rowen Craigie said yesterday at the group’s annual shareholder meeting - from which media were barred - that there would be "some dislocation" over the next 18 months. "Crown’s operations are diversified and located across different markets. This diversification assists in the mitigation of some of the risks associated with economic downturns in particular regions," he said.

"While some of the markets in which those businesses are located may see some dislocation in the next 12 to 18 months, taking a two to three year view we believe they are likely to return to steady growth trends. "But Crown’s Australian operations continue to be its best business.

"Recent trading at our Australian casinos, Crown Melbourne and Burswood, continues to be solid. Combined revenue from table games (excluding VIP commission program play) and gaming machines from July 1 to October 21, 2008, is up 4 per cent on the previous corresponding period last year," Craigie said. "Year-on-year growth in international VIP commission program play has been very strong over the same period."

But he added there had been some "softness" in a few areas such as low-end slots, corporate functions and hotel bookings. Crown’s earnings before interest, tax, depreciation and amortisation grew by 8.2 % in 2007-08 and the group said it expected solid EBITDA growth this financial year despite expecting a more difficult trading environment and ongoing renovations. "For 2008-09, we forecast 5.3 per cent EBITDA growth on 4 % revenue growth for the two domestic casinos," said Citi analyst Jenny Owen.

Craigie noted new measures by the Chinese Government to slow down growth in Macau, where Crown was building its second casino, due to open next year. "The Chinese Government has also been making changes which impose some restrictions on the ability of some Chinese citizens to obtain visas to travel to Macau," Craigie said.

"These changes are targeted at moderating the extraordinary growth in Chinese visitor numbers. We have seen the impacts of the latest restrictions in September with year-on-year gaming revenue growth for the month declining by about 3 %." Still, the news and continuing stock market slump sent Crown shares continuing their downward spiral, off 18c to close at us$ 6.30. The stock has fallen from us$ 14.27 since it was split from Packer’s media investment group Consolidated Media Holdings last December, wiping about us$ 6 billion in value off the group.

While a raft of US-based casino stocks have fallen, many analysts believe Crown is undervalued. "Given weakness among peers, Crown were questioned on acquisition intentions," said Ms Owen, who had a price target of us$ 11. "Crown highlighted strength of their balance sheet relative to peers but the most important projects are the completion of domestic casino upgrades, and integration of Cannery."

The comments on the gaming business came only a day after Packer cut ties with his family’s 90-year-old media empire.

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