Echo to sell Townsville casino

Echo Entertainment CEO confirms casino operator is looking to sell off Townsville

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 23, 2013 2:11 pm AEDT

Casino owner Echo Entertainment (ASX: EGP) has revealed it is looking to sell off its Townsville casino for an estimated $75 million.

According to Brisbane's Courier Mail, CEO John Redmond confirmed speculation that the company was keen to dump its Townsville Casino, which didn't' fit with the rest of its East Coast operations. Echo owns the Gold Coast's Jupiters Casino, Brisbane's The Treasury and the jewel, The Star casino in Sydney, as well as Townsville's Jupiters casino.

Echo is preparing to spend up to $12.5 billion refurbishing its two Queensland casinos, after coming under fire from the Queensland Premier for being tired and not up to world class standards. Echo's three casinos have struggled to attract international VIP high rollers, while poor consumer confidence locally has also affected revenues.

Mr Redmond said the issue for Echo's Brisbane casino is that the buildings are heritage listed, so could not be fully developed or expanded. Mr Redmond even suggested that a casino probably should never have been created in the Treasury buildings. Echo wants to move the casino down the road, and possibly use the Treasury buildings as a luxury hotel.

The buyer for the Townsville casino is rumoured to be Singapore-listed Lasseters International Holdings, which also runs the Lasseter Hotel Casino in Alice Springs. It's unlikely that James Packer's Crown (ASX: CWN) would be interested in the Townsville casino, preferring to focus on casinos in much larger cities. Another potential bidder could be New Zealand's SkyCity Entertainment Group (ASX: SKC), which already owns casinos in Adelaide and Darwin.

Having Crown compete with Echo in Sydney, Echo may now have to face competition in Brisbane. The state government is looking at expressions of interest for a casino and resort development in the next month or so, and James Packer has been seen visiting the potential casino precinct, while Crown has indicated it would be interested. However, Mr Redmond says Brisbane is not Singapore and would be unable to sustain two rival casinos, calling it economic suicide.

Foolish takeaway

It's understandable that Echo wants to sell of its non-core casino, and focus on its three primary sites. The issue is the company may face competition from Crown's casinos in at least two of those cities – Brisbane and Sydney.

Every Aussie investor knows Telstra, but only the smart money is on the move now… Discover whether you should buy, sell or hold Telstra shares in our brand-new report, written by a top Motley Fool analyst. It's free, click here for your instant download!

More reading

Motley Fool writer/analyst Mike King doesn't own shares in any companies mentioned.

Automatic Renewal

By taking up this offer, you will also be enrolled in our auto-renewal program, which is our way of making your ongoing subscription easier by ensuring uninterrupted service. Don't worry, though – you're not locked in, and can cancel your auto-renewal at any time before each 'anniversary' date without question or penalty.