Echo to sell Townsville casino

Echo to focus on its core casinos

Mike King

Mike King is a Fool.com.au Investment Analyst and Writer. He caught the investing bug more than a decade ago, at a time when the U.S. had invaded Iraq and fear reigned in the markets. His initial success as the markets took off encouraged his passion and thirst for knowledge. With 13 years behind him at one of Australia's largest domestic banks, Mike's passion for stocks led him to join a boutique funds management firm, where he stayed for four years. A seven-year stint in equity research at one of the largest investment banks in the world followed that, giving Mike a thirst to pursue his passion further. Mike holds a Diploma in Applied Finance and Investment and a Graduate Certificate in Financial Planning. His passion is to help retail investors invest better, and that passion was one of his primary reasons for joining The Motley Fool Australia in late 2011. Mike has written thousands of articles since joining, including for Fairfax Media, Yahoo!7, Ninemsn and has also appeared on ABC's The Business. You can see all of Mikes' holdings here

Published October 17, 2012 12:00 pm AEDT

Echo Entertainment Group (ASX: EGP) is planning to sell its Townsville casino, according to The Australian Financial Review, and could receive up to $100 million in proceeds.

The newspaper suggests that the company wants to focus on its core casinos in Sydney, Brisbane and the Gold Coast.

Singapore-listed Lasseters International Holdings are believed to be one of the major bidders involved in the sale, although New Zealand's SKYCITY Entertainment Group (ASX: SKC) could also be interested. SKYCITY owns casinos in Queenstown, Auckland and Hamilton in New Zealand, and Adelaide and Darwin in Australia. A casino in Townsville appears to be a natural asset for the company, as it focuses on the smaller cities in Australasia.

Echo is believed to be spending up to $625 million to refurbish its Brisbane and Gold Coast casinos, as it focuses on attracting the international high-roller crowd, many of whom are located in Asia. The sale of Townsville could also help to shore up the company's balance sheet, as it tries to fend off James Packer's Crown Limited (ASX: CWN). Crown owns 10% of Echo and is seeking approval from regulators to increase its stake up to 25%.

Like Echo, Crown is focusing on attracting high roller gamblers to Australia, and has plans to build a six-star hotel with VIP casino facilities at Barangaroo, on Sydney's waterfront. That would complement its Crown casino complex in Melbourne and its Burswood casino in Perth.

Crown is also developing a six-star hotel at its Perth casino at a cost of $568 million, to make it more attractive for international VIP gamblers and tourists. The plan includes 500 additional gaming machines, which could be good news for poker machine makers, Aristocrat Leisure (ASX: ALL) and Ainsworth Game Technology (ASX: AGI).

The Townsville casino appears to be a valuable asset. In the last financial year, the company reported a 60% jump in earnings before interest, tax, depreciation and amortisation (EBITDA), despite revenues rising just 5%. That result could see Echo achieve a decent sale price.

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Motley Fool writer/analyst Mike King doesn't own shares in any companies mentioned. The Motley Fool's purpose is to help the world invest, better. Take Stock is The Motley Fool's free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. Click here now to request your free subscription, whilst it's still available. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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