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Crown posts soft first-half result as punters spend less

Lex Hall  |  20 Feb 2019Text size  Decrease  Increase  |  
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Casino operator Crown Resorts had a strong number of punters coming through its doors but they're spending less on average, which has resulted in a soft rise in first-half profit.

Australia's biggest casino operator posted a normalised profit up 0.9 per cent to $194.1 million. Crown's total revenue fell of 7.3 per cent to $1.47 billion, for the six months to 31 December.

Turnover from its VIP program of $19.9 billion fell 12.2 per cent over the six months, following weaker trade through November and December.

"Crown's Australian operations' first-half result reflected mixed trading conditions," executive chairman John Alexander said.

"Main floor gaming revenue increased by 0.9 per cent, with modest revenue growth in Melbourne offset by continued softness in Perth," Alexander said.

While Crown reported a statutory fall in first-half profit of 26.7 per cent, Morningstar analyst Daniel Ragonese said the normalised profit numbers gave a truer indication of how the business is tracking.

"Normalised numbers are crucial because what they're adjusting for fluctuations in the casino's win rates, which can be very volatile," Ragonese said.

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"The number of customers that played in the period was strong, but these customers are spending less on average, which could reflect a more general softening across the consumer landscape. The VIP segment experienced a similar scenario with strong bookings, however lower average turnover per player." 

At 3.15pm Sydney time Crown shares were down 5.45 per cent to $11.54 on Wednesday - a 23 per cent discount to Morningstar’s fair value estimate of $15.

Earlier this month, Crown was named among the 11 Australian stocks on Morningstar’s global best ideas list. Crown is rated as a narrow-moat stock and is expected to snatch VIP customers from its rival, Star Entertainment and its flagship gaming venue, the Star casino, in the Sydney waterfront suburb of Pyrmont.

The company said construction of Barangaroo's Crown Sydney Hotel luxury resort remains on schedule for completion in the first half of 2021.

Another factor tipped to secure strong growth for the foreseeable future is the influx of Chinese tourists to Australia's two major cities: Sydney and Melbourne, where Crown operates its flagship property.

"Despite Crown's near-term challenges we're positive on the long-term outlook for VIP and confident that the Sydney casino will contribute to strong earnings growth over the medium term.

In December Crown resorts scored a major win in its legal battle with the NSW government over planned development that would have obstructed views of the Sydney Opera House and the Harbour Bridge from its casino and new hotel.

The company will pay an interim dividend of 30 cents, of which 60 per cent is franked.

is senior editor for Morningstar Australia

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