Crown, Echo Entertainment and Skycity Entertainment: 3 casino stocks to watch

Macau's "City of Dreams" casino investment has a big payout; QLD's new casino licences open up competition.

a woman

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Crown (ASX: CWN) has been moving this year to expand its City of Dreams brand for integrated resorts and casinos. Its Macau casino, owned through Melco Crown, a joint venture between Crown and Melco International, was the first of its casinos overseas, and currently it is developing another in the Philippines that it is set to be open in mid-2014.

As an investment the Macau casino has paid off in spades with its latest valuation standing at $6.2 billion against the initial $600 million invested in the development. The plan is to expand to other Asian capitals to replicate the success it is enjoying now. Next is Sri Lanka, where the company is in negotiations with the government over developing a casino complex estimated to cost $400 million.

It hasn't taken its eyes off the domestic market here, either. It is building a six-star hotel in Perth due to open in 2016, and with the Queensland government planning to offer three new casino licences in the state, the next target is constructing a new integrated resort in the Brisbane CBD, which already has The Treasury Casino, operated by Echo Entertainment (ASX: EGP).

Other casino opportunities could be opened up in the Gold Coast and Cairns, but Crown has expressed interest in creating a new complex only in Brisbane. No doubt Echo Entertainment will be under pressure to upgrade its casino there and the Jupiters Casino in the Gold Coast to hold off competition once its exclusive rights expire.

Echo Entertainment  is proposing a $1.6 billion remodelling and upgrading project for the two casinos, and is waiting on state approvals. Its Brisbane casino is in a heritage listed building, so it is offering to exchange the building site for nearby real estate that will be put up for sale by the state government. Crown is vying for the same site.

In a recent development, Echo Entertainment has put its Townsville casino up for sale for $75 million. Although Crown may not be interested in acquiring it, it may attract attention from Skycity Entertainment (ASX: SKC). The north QLD casino had a little under $10 million in earnings before interest, tax, depreciation and amortisation, so on valuation terms that would give it a price-to-earnings ratio of more than 7.5.

Foolish takeaway

Like the casino business itself, the glitz and glamour can be exciting, but you as an investor have to look at the reports, revenue and earnings figures to see if these stocks fit within your portfolio.

Rather than taking a gamble, you want rock solid growth and a durable competitive advantage in the stocks you buy. Make sure it isn't only the house that always wins.

Motley Fool contributor Darryl Daté-Shappard does not own shares in any company mentioned. 

More on ⏸️ Investing

A white and black robot in the form of a human being stands in front of a green graphic holding a laptop and discussing robotics and automation ASX shares
Technology Shares

Joining the revolution: How I'd invest in ASX AI shares right now

Advances in artificial intelligence (AI) could usher in a new industrial revolution. Here’s how you can invest in it.

Read more »

Close up of baby looking puzzled
Retail Shares

What has happened to the Baby Bunting (ASX:BBN) share price this year?

It's been a volatile year so far for the Aussie nursery retailer. We take a closer look

Read more »

woman holds sign saying 'we need change' at climate change protest
ETFs

3 ASX ETFs that invest in companies fighting climate change

If you want to shift some of your investments into more ethical companies, exchange-traded funds can offer a good option

Read more »

a jewellery store attendant stands at a cabinet displaying opulent necklaces and earrings featuring diamonds and precious stones.
⏸️ Investing

The Michael Hill (ASX: MHJ) share price poised for growth

Investors will be keeping an eye on the Michael Hill International Limited (ASX: MHJ) share price today. The keen interest…

Read more »

ASX shares buy unstoppable asx share price represented by man in superman cape pointing skyward
⏸️ Investing

The Atomos (ASX:AMS) share price is up 15% in a week

The Atomos (ASX: AMS) share price has surged 15% this week. Let's look at what's ahead as the company build…

Read more »

Two people in suits arm wrestle on a black and white chess board.
Retail Shares

How does the Temple & Webster (ASX:TPW) share price stack up against Nick Scali (ASX:NCK)?

How does the Temple & Webster (ASX: TPW) share price stack up against rival furniture retailer Nick Scali Limited (ASX:…

Read more »

A medical researcher works on a bichip, indicating share price movement in ASX tech companies
Healthcare Shares

The Aroa (ASX:ARX) share price has surged 60% since its IPO

The Aroa (ASX:ARX) share price has surged 60% since the Polynovo (ASX: PNV) competitor listed on the ASX in July.…

Read more »

asx investor daydreaming about US shares
⏸️ How to Invest

How to buy US shares from Australia right now

If you have been wondering how to buy US shares from Australia to gain exposure from the highly topical market,…

Read more »