Australian casino operator Crown Resorts Ltd’s share of net profit after tax from Asian casino developer Melco Crown Entertainment Ltd (MPEL) fell nearly 58 percent year-on-year in fiscal year 2015.
Crown’s share of such profit was AUD122.0 million (US$88.3 million) for year ending June 30, a decline of AUD165.6 million from the prior-year period, the casino operator said in a filing this week.
Judged on a normalised basis, Crown’s share of Melco Crown’s net profit after tax was down nearly 46 percent year-on-year to AUD161.3 million.
“We believe that the Australian market is currently discounting Melco Crown by 29 percent in the Crown share price; which is just the fourth time in the past three years that it has been at this level,” said a note on Wednesday from Matthew Ryan and Michael Aspinall of JP Morgan Securities Australia Ltd.
“We believe the Crown share price has incorporated the potential for positive policy measures and the 250 tables given to Studio City,” added the analysts, referring to a new US$3.2-billion Macau casino resort 60-percent owned by Melco Crown and that is due to open on October 27.
“While Golden Week was strong, we forecast October will still be down more than 30 percent. As a result, we’d like to see more evidence of an improved daily run rate before concluding that Macau has bottomed,” the analysts stated. They were referring firstly to a national holiday in China at the beginning of October that each year draws big crowds of Chinese tourists to Macau, and secondly to the likely year-on-year decline in casino gross gaming revenue in Macau for the whole month of October.
In a commentary on Crown’s own pipeline of new casino projects – that are likely to draw some customers from Asian markets – the institution said it expected the proposed Las Vegas scheme would require AUD1 billion in equity from Crown, while new construction in Melbourne would require AUD500 million from Crown. JP Morgan added that Crown Sydney at Barangaroo was a AUD2-billion development, with all debt on the firm’s balance sheet.
“In our view, the banks will likely give Crown some headroom while they are in the intensive capex [capital expenditure] period (possibly up to 3.5x) but we would categorise the balance sheet as ‘full’ at the moment,” noted Mr Ryan and Mr Aspinall.
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