Bloomberg News

Crown Misses Earnings Estimates as High-Rollers Shun Casinos (3)

February 21, 2014

Crown Chairman James Packer

James Packer, co-chairman of Melco Crown Entertainment Ltd. and chairman of Crown Ltd., has quit most of the media investments inherited from his father Kerry in an attempt to capitalize Asian tourism through casino investments in Australia, Macau, the Philippines and Sri Lanka. Photographer: Julian Abram Wainwright/Bloomberg

Crown Resorts Ltd. (CWN), the gaming company controlled by billionaire James Packer, slumped after first-half profit missed analyst estimates as a 26 percent decline in bets from high-rolling gamblers weighed on earnings.

Net income was A$382.5 million ($344 million) in the six months ended Dec. 31, the Melbourne-based company said in a regulatory statement today, more than double the A$180.8 million result a year earlier. Crown fell 3.2 percent to A$16.68 at the close in Sydney trading, the biggest decline since Dec. 13.

Australian casino companies are counting on growing demand from high-spending Chinese and other Asian tourists to justify more than A$2 billion in investments in new hotels and gaming rooms. Turnover from the VIP program at the Crown Melbourne casino fell 33 percent in the period amid “competitive challenges,” the company said.

“It’s slightly worrying what’s happening in the VIP market,” Killian Murphy, an analyst at CIMB Group Holdings Bhd. in Sydney, said by phone after the results. “The casinos round the region are all very competitive and it’s a small pool of players.”

Normalized net income, which flattens out the volatility of gambling winnings, was A$315 million, missing the A$328.7 million median of four analyst estimates compiled by Bloomberg News.

Asian Tourism

Packer has quit most of the media investments inherited from his father Kerry in an attempt to capitalize on Asian tourism through casino investments in Australia, Macau, the Philippines and Sri Lanka.

He’s promised to spend about A$1.3 billion on a casino and hotel aimed at VIP gamblers on the shores of Sydney Harbour. The resort will compete with the Star complex on an adjacent stretch of shore, where Echo Entertainment Group Ltd. (EGP) has spent A$870 million on a refurbishment intended to lure the same market.

Crown’s group revenue grew 3.4 percent to A$1.56 billion during the first half and earnings before interest, tax, depreciation and amortization jumped 27 percent to A$479 million, the company said in its statement.

Revenue from Crown’s main gaming floors in Australia fell 0.6 percent to A$757.7 million as poor consumer sentiment reduced people’s appetite for gambling. Turnover from VIP gamblers in Melbourne and Perth slumped 26 percent to A$23 billion, while non-gaming sales increased 6.8 percent to A$333.9 million, the company said in its statement today.

Weak Sentiment

“We have seen weak consumer sentiment,” that’s hurt trading in Melbourne and Perth, Rowen Craigie, chief executive officer, said in the statement. “Their local economies are experiencing structural and cyclical challenges.”

A measure of Australian consumer confidence fell to a nine-month low this month. The Reserve Bank of Australia has cut interest rates to a record-low 2.5 percent to stimulate spending as a mining investment boom fades.

“The domestic side is tracking OK at best, given the weak consumer environment,” Theo Maas, a partner at Arnhem Investment Management in Sydney, said by phone before the results. “The real growth is coming from Macau.”

Packer’s Melco Crown Entertainment Ltd. (6883), which owns Macau’s City of Dreams casino, said Feb. 13 that net income more than doubled from a year earlier to $223.8 million in the three months ended December and promised to pay out 30 percent of its net income as quarterly dividend in future.

Crown has a 34 percent stake in the Hong Kong-based venture, according to Melco Crown’s most recent annual report. The company’s share of Melco’s normalized net profit was A$140.6 million, more than double its result a year earlier.

To contact the reporter on this story: David Fickling in Sydney at dfickling@bloomberg.net

To contact the editor responsible for this story: Stephanie Wong at swong139@bloomberg.net


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