What: Shares in casino operator Echo Entertainment Group Ltd (ASX: EGP) have rallied 6.6% by lunchtime today after releasing results which beat market forecasts.
The stock has now gained over 39% since January when investors were anxious about the potential negative effect Crown Resorts Ltd's (ASX: CWN) entrance into the Sydney market would have on Echo's flagship 'The Star' casino.
So what: The results show that on a normalised basis revenues grew 3.8% and net profit after tax soared 24.6% to $158.2 million. The rise in profits was helped along by growth in both main gaming floor and private gaming room earnings at The Star, growth in slot machine earnings both at The Star and in Echo's Queensland operations, and a jump in The Star's international VIP rebate business.
Now what: Management has commented that so far FY 2015 revenue growth has been broad based with all major properties delivering revenue growth at levels consistent with the second half of FY 2014 – this trading update bodes well for the current year.
Some investors will rightly remain anxious about the upcoming tender process for a casino license in Brisbane, which will once again see Echo face-off against the James Packer-led Crown Resorts. Judging by Echo's share price gains post the Sydney decision, these concerns may turn out to be short lived.
