Crown Resorts Ltd (ASX: CWN) beat most analysts' expectations for full-year results this morning by posting a normalised profit of $640 million up 35.2% on the prior year.
Overall for Crown it was a tale of two regions in Asia and Australia on different economic growth trajectories. Weak consumer sentiment in Australia adversely impacted trading at Crown Melbourne and Crown Perth as revenues and profits fell flat on the prior year.
However, Crown's one-third ownership interest in Asia-based and Hong Kong-listed, Melco Crown Entertainment Ltd (NASDAQ: MPEL) (SEHK: 6883) picked up the slack. The City of Dreams casino in the gamblers' paradise of Macau was the major contributor to growth in Crown's normalised profit.
Notably, Melco Crown shares plunged recently after it announced a revenue decline of 7% across its Asian operations for the quarter ending June 30, 2014. This was partly blamed on the FIFA World Cup and stricter Chinese state controls on money movements. Either way Crown Resorts investors will need to keep a close eye on this situation when Melco Crown reports for the next quarter, as it remains a stock heavily leveraged to the good health of the Chinese economy.
Melco Crown is planning on opening another City of Dreams venue in Manila in The Philippines, while there are also plans for Sri Lanka and ambitions for the jackpot Japanese market. As the world's second largest economy with a love of the high-life, Japan, is a market chief executive James Packer is unsurprisingly interested in. Tokyo is due to host the Olympic Games in 2020 and the Japanese government is reportedly preparing legislation to legalise casinos in an attempt to boost tourism ahead of the Olympics.
The ambitious Packer also has plans to develop a casino in Las Vegas and six-star hotel and casino at Sydney's Barangaroo Wharf, where much of the work for the project is being undertaken by Lend Lease Group (ASX: LLC). Yesterday Echo Entertainment Group Ltd (ASX: EGP) shares rallied more than 6% on the back of a strong performance from its flagship The Star casino located close to Barangaroo in Sydney's Pyrmont.
Echo's management will be rolling up their sleeves at the prospect of going toe to toe with Packer's Sydney venture, but will have a tough fight on their hands given Packer's recent form.
Crown remains a proven operator in Australia and has beautiful leverage to the Asian growth story, whether it can execute on the potential remains to be seen. Cautious investors may see this business as a hold, but those inclined to take more of a gamble may see value at today's prices.
Crown's shares are up 4.52% to $15.50 in morning trade.
