2 good reasons why Crown Resorts Ltd could be a smart play in the entertainment and leisure industry

Domestic and international gambling venue expansion builds up the bull case for growth.

Darryl Daté-Shappard

I started investing after finding a copy of Peter Lynch's "Beating the Street" in the English book section of a library in Japan, where I was living at the time in 1997. Seeing that regular people can find investment ideas just as easily as professionals, I used the philosophy of that book to invest in stocks in Japan, and later in Australia after moving in 2001. I also have experience in property investing, and went on to complete my masters degree in Applied Finance at QUT in Brisbane. I follow the investment style of Peter Lynch, Phillip Fisher and Warren Buffett-- knowing what you invest in, doing your homework to keep up with a stock's story and holding a healthy skepticism of what the stock market calls "value".

Published May 9, 2014 4:06 pm AEST

Integrated resorts and casino operator Crown Resorts Ltd (ASX: CWN) could be a long-term grower for those seeking exposure to industries that will benefit from more consumer spending.

Domestic consumer spending growth may be constrained by the effects of the mining pullback, as well as the jobs and work to be lost from automakers planning to stop manufacturing in Australia. As consumer confidence slowly builds up, companies having overseas exposure as well could make up for that delay.

Here is why I believe Crown Resorts could have stable growth abroad and consolidate its market presence here in Australia.

1- It is expanding the number of cities which it will have casinos in. Up until now, the Sydney and Brisbane markets have been closed to it because the state governments weren't issuing new gambling venue licences.

Now, there is an opportunity to get at least two more. NSW will now allow Crown to develop a VIP gambling venue within the Barangaroo South building development in conjunction with a six-star hotel and shopping venues.

Also, it is applying for at least one of three new casino licences being proposed by the Queensland government. Up until now, Echo Entertainment Group Ltd (ASX: EGP) had exclusive gambling business in both Sydney and Brisbane, but that could change over the next several years.

2- Overseas markets like Macau, the Las Vegas of Asia, have opened up for Crown Resorts at a time when Chinese tourism is flourishing and more major cities in Asia want to attract tourists and high rollers to their shores.

Already the company has several venues in Macau through its Melco Crown joint venture and will open another soon this year in Manila. Proposed expansions in South Korea, Sri Lanka, Japan and Vietnam are also possible as those countries relax gambling legislation.

Casinos can be expensive to develop, but once complete can experience healthy earnings margins. If major tourist destinations are opening to this entertainment and leisure industry, Crown Resorts has the best chance to capitalise on it amongst the Australian casino companies.

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