UBS suggests the market is discounting the longer-term outlook for Crown Resorts. The broker estimates cash burn of -$40m per month during the period the casinos are shut down.
This provides significant flexibility against a cash balance of around $850m. Nevertheless, the broker assumes construction of Crown Sydney slows down.
Liquidity and gearing should not be an issue after the re-opening, if the company can collect on its estimated $800m of apartment sales.
The main downside risk is the NSW public casino inquiry, which has been postponed. Rating is upgraded to Buy from Neutral and the target reduced to $9.15 from $11.40.
Sector: Consumer Services.
Target price is $9.15.Current Price is $7.20. Difference: $1.95 – (brackets indicate current price is over target). If CWN meets the UBS target it will return approximately 21% (excluding dividends, fees and charges – negative figures indicate an expected loss).