Packer's Crown profit falls 47 per cent on Macau woes,
shares up on revenue rebound -
19th February 2015
Of Dreams Gaming
Packer at the opening of Melco-Crown's new mega-casino
in Manila this month. "I like playing blackjack,
but building casinos is a gamble as well." he
told a TV reporter.
Crown Resorts chief executive Rowen Craigie says a
deal with the Victorian government that slashed tax
rates on VIP gambling will allow the company to be
more aggressive in its pursuit of high rollers, as
the casino company looks to offset falling earnings
resurgence in VIP revenue at Crown Melbourne, the
James Packer-controlled casino operator's flagship
property, was the main driver in its half year result
that beat expectations and sent shares up to close
9.1 per cent higher at $15.79 The stock has gained
36 per cent from a 12-month low of $11.74 hit in January.
Craigie said the deal that came into effect in November
2014 and reduced Crown's tax rate on VIP revenue to
10 per cent, was not the driver behind a 61.4 per
cent rise in bets placed by VIP gamblers to $37.1
billion for the half. However he said it would allow
Crown to spend more on sales and marketing efforts
like VIP tournaments and better incentives in future.
removal of VIP super tax is going to be a critical
factor in growing that business over time," he
told an analyst briefing.
deal with the former Napthine government came after
eight months of fierce lobbying and followed the surprise
introduction of a levy on poker machines in December
2013 that the billionaire Mr Packer was said to be
furious about. In the end Crown avoided paying the
levy, got an extension on its licence expiry from
2033 to 2050 and received more than 200 new pokies
and table allotments. In return it committed to making
at least $1 billion of payments over the period and
had its progressive VIP tax scrapped.
net profit slumped 47.2 per cent to $201.8 million
on the back of one of the worst-ever periods for the
gambling hub of Macau where its subsidiary Melco Crown
operates two casinos. A one-off $61.3 million write-down,which
primarily dealt with US assets, but also included
$5.5 million spent on the failed Sri Lanka venture,
also hampered the result.
Crown's normalised net profit, which smooths out volatility
associated with high rollers, rose 2.3 per cent to
$322 million for the six months ended December 31.
Normalised revenue rose 17.2 per cent to $1.7 billion,
which was well ahead of the average analyst estimates
of $1.49 billion, according to Bloomberg.
equity-accounted share of net profit in the half from
Melco Crown, the Macau casino operator it operates
in a joint venture with Lawrence Ho, fell 42.2 per
cent to $85.3 million on a statutory basis as a sweeping
corruption crackdown continues to cripple the world's
largest gambling hub.
Craigie, whose contract was extended on Thursday for
a further three years, said it was "reasonable"
to assume that Australia, New Zealand and the Philippines
Melco's newest market were benefiting
from the crackdown in Macau.
in a nod to strong VIP activity at the Sydney and
Auckland casinos controlled by rivals Echo Entertainment
Group and Sky City Entertainment respectively, Mr
Craigie said the local market had also benefited from
investments in high roller facilities. "It's
a reward for effort as well as the diversion from
Macau," he said.
Theo Maas, who is a partner at Arnhem Investment Management,
said the strong VIP results at Crown and Echo gave
him confidence about the prospects for the $2 billion
luxury hotel and casino that Crown plans to open in
Sydney in 2019.
VIP market, which is what [Crown] Sydney is going
to be all about, is going to be big enough to support
a new casino in Sydney," he said. "I'm a
bit more relaxed about the returns that Crown will
be able to make at that property."
Craigie said the rebound in performance at Echo's
The Star in Sydney proved Crown's original pitch that
the city's casino market had been underperforming.
"What Echo is starting to demonstrate is that
the strength of the Sydney market is now revealing
itself," he said. "We'll be sharing that
market with Echo when we open."
analyst Michael Goltsman said the turnaround in VIP
turnover at Melbourne was "exceptional"
given Crown's guidance to the market at its shareholder
meeting in mid-October was that for the first few
months of the half turnover had been flat. "The
sharp VIP turnaround mirrors similar performance by
other casino operators," he said.
Goltsman said the 3.5 per cent rise in revenue from
Perth and Melbourne's main gaming floor tables and
pokies to $784.2 million was positive. Non-gaming
revenue from food and beverage, retail and entertainment
rose 2.4 per cent to $341.9 million.
board confirmed it would appoint Robert Rankin as
a director. He is the new boss of Mr Packer's investment
vehicle Consolidated Press Holdings. Mr Craigie said
Mr Rankin would not be involved in the day to day
running of Crown "but his strategic involvement
... is going to be invaluable."
board declared an interim dividend of 18c per share,
to be paid on April 10. For Mr Packer, who owns 50.01
per cent of the company, the distribution amounts
to $65.6 million.
Sydney Morning Herald)