Crown – Jamie Packer re-joins the board

Posted on | by Leon Hinde | Leave a Comment on Crown – Jamie Packer re-joins the board

The share price in Crown Resorts (CWN) has staged a solid rebound since hitting a low of $10.30 in early November. With Jamie Packer re-joining the board and some new capital management initiatives,  there could be further upside from the current price of $11.70.

An analyst report yesterday noted that Melco Crown, in which CWN owns a 11.2% stake, has declared a USD 650 million special dividend to be paid in early February.

Aside from this dividend payment, the gaming giant has lowered its VIP revenue projections, adjusted revenues for CWN’s lower equity stake in Melco, resulting in a lowering of its EPS estimates out to 2019 by close to 2%.

The company’s board reshuffle highlights that CWN has yield and near-term capital management appeal with the prospect of further de-leveraging from offshore strategic initiatives.

Taking into account the trimming of its earnings forecast, the group is trading on 9.3 times fiscal EBITDA projections.

Crown Resorts – Update

Posted on | by Leon Hinde | Leave a Comment on Crown Resorts – Update

Crown Resorts has announced several changes to their strategic business plan to simplify the business and enhance their balance sheet.

The firm has decided to cancel its Alon project in Las Vegas, sell off a major stake in its Macau casino business and cancel plans to spin off its international business.

The company will sell off almost half of its holdings in Melco Crown Entertainment for $1.6 billion, using the proceeds to cut debt, pay a special dividend of $500 million and enable a share buyback of around $300 million. Crown’s share of Melco’s annual net profit dropped by 60% in 2016 to $43 million following a corruption crackdown by Chinese authorities.

We still like the long side of CWN, although our upside target has been lowered from $14.00 to $12.50 following earnings revisions due to CWN’s reduced stake in Melco. CWN currently trades on 10x FY 17 estimated EBITDA and is on pace for a 5% yield for FY 2017.  

Chart - CWN
Chart – CWN

Tabcorp – FY18 Earnings Upgrade

Posted on | by Leon Hinde | Leave a Comment on Tabcorp – FY18 Earnings Upgrade

Tabcorp (TAH.ASX) will likely see $20m+ in earnings upgrade from the NSW Government’s decision to reverse its ban on greyhound racing from FY18.

FY17 revenue of $2.3b looks flat on the same time last year, with EBIT of $350m and EPS $0.23. Out into FY18 the investment case picks up. FY18 revenue $2.35b, EBIT jumps to $370m on $0.25 of EPS and a forward yield of 5%+. With a  relatively high payout ratio and 20x PE, the stock looks slightly expensive and we prefer to be a buyer on a dip back below $5.00

TAH.ASX

tah

CWN.ASX

Crown looks attractive at or near $13.00 with gaming revenue picking up in Macau and the pending breakup of the ASX listed Crown business splitting into 3 separate entities, unlocking value for shareholders.

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Crown FY16 Earnings Result

Posted on | by Leon Hinde | Leave a Comment on Crown FY16 Earnings Result

CWN FY16 NPAT $406m is down 23% on the same time last year. Normalised EBITDA was up 4% and EBIT up 2% on last year.

FY17 outlook on our numbers suggests that Crown could grow EBITDA earnings per share around 5% to $900m and payout $0.60 per share in dividends. This places the stock on a forward yield of 4.2%.

We retain our long exposure and feel there’s added value yet to come from the proposed break up of CWN.

 

Long CWN

Posted on | by Leon Hinde | Leave a Comment on Long CWN

Long CWN.ASX

CWN

Crown is a slightly higher risk trade, however, I think James Packer is going to continue to be innovative in ways to unlock value for shareholders and it’s worth gaining exposure to the potential breakup story. Crown investors will gain exposure to the international assets, domestic property and domestic gaming assets. I’m looking for CWN to trade to $14 in the near term. Run a stop-loss below $11.30