Why Crown Resorts Limited shares could be looking up

Crown Resorts Limited (ASX:CWN) may be putting its Chinese problems behind it.

Tom Richardson

Tom is a holder of the CFA Society of the UK administered Investment Management Certificate (IMC) and has more than a decade's professional experience in the investment management industry in Australia and the UK. Tom now works as a writer and editor for TMF Australia and has two easy to remember rules of investing he likes to follow. Avoid overpaying for growth stocks and avoid paying at all for stocks that are cheap for a reason. Tom prefers growth investing over value investing and says it's not rocket science, just avoid overpaying for the best returns.

Published August 4, 2017 12:36 pm AEST

This morning casino operator Crown Resorts Limited (ASX: CWN) reported its financial results for the full year ending June 30 2017. Below is a summary of the results with comparisons to the prior corresponding year.

Reported net profit of $308.9 million, down 21.5% before significant items
Net profit adjusted to exclude any variance on theoretical win rate on VIP program play of $343 million, down 15.5%
Normalised revenue of $2,825 million, down 12.7%
Normalised EBITDA of $833.7 million, down 10.7%
Net gain on significant items attributable to parent of $1,557 million, the majority of the gain coming from the sale of its interest in Melco Crown
Final dividend of 30 cents per share, total annual dividends of 60 cps, excluding 83 cps special dividend

Crown's past financial year has been dominated by the arrest and jailing of 19 current or former members of staff in China for "gambling crimes" related to the illegal promotion of gambling in China.

The revenue and profit falls over the course of the year are related to the reluctance of Chinese high rollers to visit Crown's Australian operations, although this may be a storm that blows over in time.

Outlook

Crown is also investing heavily for the future as the casino and luxury tourism industry is competitive where big -spending customers expect the best and latest properties. Crown's "six-star " Crown Sydney resort on Sydney Harbour is due for completion by 2021, with other heavy investments being made in existing or new Melbourne, Perth, and overseas properties.

Crown also completed a $500 million on-market share buyback in June 2017 and intends to buy back up to another 29.3 million shares currently on issue, which have a current market value around $370 million.

Its trailing dividend yield is a partly franked 4.4% and the group trades on an earnings multiple (adjusted for significant one-off gains) roughly in line with the market.

Given its dominant competitive position in Melbourne and track record it could be a good medium-term bet based on today's valuation.

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