Macau Weighs On Crown Profit

A rough reception for Crown Resorts (CWN) shares yesterday after it produced a weaker than forecast result thanks to the slide in gambling revenues in the casino haven of Macau.

The shares fell more than 9% at one stage yesterday as investors saw the negative impact on profits from the slump at its 33% Macau arm, Melco Crown.

The shares ended down 4.6% at $11.97, as investors returned to the stock.

CWN 1Y – Macau pressures Crown profit

News of a one-off payment from Melco Crown of around $US44 million and a sharply higher dividend of 33 cents a share, up from 18 cents previously, attracted investor interest in the wake of the initial sell-off.

That jump in dividend will see James Packer pick up more than $127 million for his 53%, against just over $73 million a year ago.

The higher dividend was needed to keep shareholders happy because the impact of the slide in Macau was much steeper than previously forecast.

The Chinese government’s continuing anti-corruption attack across the country is impacting outside China’s borders in Hong Kong and Macau and in other Asian centres where rich Chinese would normally travel to (but oddly enough, not in Australia where inbound travel from China is booming).

For Crown the impact from the anti-corruption crackdown has been felt deepest at Melco Crown and its three casinos in Macau where gaming revenues have been falling now for 18 months and fell more than 30% in the December half year.

Crown’s equity-accounted share of net profit from Melco Crown, which it controls with Lawrence Ho, plunged 89% to just $9.4 million thanks to that anti-corruption crackdown in China.

To soften the impact of the weak result, Crown said Melco will pay it a special dividend of $US120 million ($166 million) by March 16 – a move which will see Crown get around $US44 million. It will have a similar impact for Crown as a buyback from Melco Crown.

Crown said net profits fell 22.1% to $205m in the six months ended in December, while so-called normalised net profit (adjusted to take account of changes in the theoretical win rate at the casinos) slumped 35%.

That came on the back of a 10.3% rise in revenue to $1.87 billion. Crown’s earnings before interest, tax, depreciation and amortisation (EBITDA) fell 5.7% to $424.4 million from $450.2 million. Statutory net profit increased by 1.6% to $205 million after significant items.

Crown’s Australian casino resorts saw normalised EBITDA rise by just 0.9% to $482.6 million, which disappointed the market.

Crown is 53% owned by billionaire James Packer, who stepped down as director late last year sparking reports he might try and take the company private. Crown said yesterday no proposal had been received. Earlier this month, Crown said it had been hit by a $250 million tax bill relating to tax paid in the US from 2009 to 2014.

About Glenn Dyer

Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.

View more articles by Glenn Dyer →