Crown remains bullish on Macau

Crown remains bullish on Macau
By Hannah Edensor


Casinos operator Crown Resorts says conditions in one of its key markets, Macau, are weak but it remains bullish about prospects there.

James Packer’s gaming group has a 34 per cent stake in joint-venture casinos operator, Melco Crown Entertainment (MCE), which operates Macau’s City of Dreams and is set to open another property, Studio City, later in 2015.

A lower share of earnings from MCE weighed on Crown’s first half profit, which fell 47 per cent to $201.75 million.

Crown’s share of MCE’s profit fell 42.2 per cent to $85.3 million amid weak trading conditions in Macau.

Chief executive Rowen Craigie warned the deterioration in the Macau market had continued into the second half.

Macau’s gaming market had been affected by a Chinese government crackdown on corruption, visitor visa changes, and China’s economic slowdown.

“But we remain very bullish about the prospects of China over the medium to long term: the expansion of the middle class, the general freeing-up of the ability of the Chinese to travel,” Mr Craigie told reporters.

“I think there is no doubt that China will be the major source of tourism and high-end gaming expenditure for the world going forward.”

Mr Craigie said Studio City would find the operating environment more favourable over the medium term compared to when it opens later this year.

Authorities in Macau have indicated there may be changes relating to smoking in casinos, which could present another headwind for Macau.

But Mr Craigie said Australian casinos could still experience good growth in the Chinese VIP market even if Macau is in decline.

He said the weakness in Macau and Sri Lanka’s rejection of Crown’s proposal to build a $US350 million casino resort there had not deterred Crown or MCE from expanding in Asia.

For example, MCE was keen to pursue any opportunities arising in Japan, but that required legislative changes.

Crown also announced on Thursday that it had written down its investment in casino operator Cannery Casino Resorts in the United States to nil, resulting in a $55.9 million impairment charge.

That charge also weighed on Crown’s net profit result, which was also affected by a lower win rate against the high-rolling VIP gamblers visiting its casinos.

Excluding the significant items and the variance in the win rate, net profit rose 2.3 per cent to $322.4 million.

Investors shrugged off the net profit slide and Crown’s Macau woes, with the company’s shares closing up by $1.42, or 9.82 per cent, at $15.88.

“It looks as if a number of other parts of businesses have picked up the slack and it’s come in better than expected,” OptionsXpress market analyst Ben Le Brun said.

COSTS EAT INTO CROWN’S PROFITS

* Net profit of $201.75m, down 47.2pct from $382.45m

* Normalised net profit of $322.4m, up 2.3pct from $315m

* Revenue of $1.7b, up 9.2pct from $1.56b

* Partly-franked interim dividend steady at 18 cents a share

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