Is it time to cheer “Viva Las Vegas” and own Crown Resorts Limited stock?

Is it time to cheer Viva Las Vegas and buy Crown Resorts Ltd stock?

James Packer's company purchases casino site right across from Wynn Las Vegas, plans to open in 2018.

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 August 4, 2014 4:15 pm AEST

Crown Resorts Ltd (ASX: CWN) is lately a hive of activity with plans for casinos and integrated resorts in Sydney and Manila. It's also possibly entering Brisbane against Echo Entertainment Group Ltd (ASX: EGP) and is looking into potential sites in Japan if gambling laws are changed there.

Another new site is where the gambling craze all started – Las Vegas.

Casino business slowdown

As recently as March the stock was about $18.00, yet now it is down 11% to about $16.00. That's not so hot compared to the 2.6% gain of the S&P/ASX 200 Index (ASX: ^XJO). The casino business in Macau, where Crown has its "City of Dreams" casino, has weakened a little with China putting some limitations on money flows to the gambling resort area. Crown's Australian casinos haven't been particularly strong as well, so that may explain why the stock is "taking a breather" after hitting a high in January.

Expansion into US casino market – Viva Las Vegas!

Ever the dealmaker, James Packer has been wanting to have his own place in Las Vegas, so when the opportunity to purchase a 34.6 acre property, the site of the former New Frontier casino, right across from the Wynn Las Vegas casino resort, came up, he jumped at it.

Initially it cost about US$280 million and will be held by a new resort company, majority owned by Crown. It will also have the financial backing of Oaktree Capital Management, a US-based hedge fund which held half of the loan of the failed New Frontier project. The new development is expected to be completed by 2018. The total planned development cost was not announced.

That will be about one year before Crown Resorts' Sydney VIP gaming venue is planned to open in 2019.

Business growth and financials

Underlying net profits have been rising generally since 2009, with 2013's about $491 million. Both its return on equity and capital have steadily risen over the years, so management's performance is improving. The stock offers a 2.3% dividend yield partially franked. With a price/earnings ratio of 17, it is in the middle of its past PE range.

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