Casino operator, Crown Limited (ASX: CWN) has posted a 34% fall in net profit to $181 million for the six months to December 2012.
While revenues increased marginally, by 1.1% to $1,506 million, the company incurred a $52 million post-tax loss on the market value of its 10% shareholding in Echo Entertainment (ASX: EGP) and lower win rates on its VIP turnover compared to last year.
Crown owns casinos in Melbourne and Perth, a 33.7% interest in Melco Crown Entertainment, which owns and operates casino, gaming, hotel and entertainment facilities in Macau. Crown also has a holding in Aspinalls Club, which operates a casino in London, and is building another two in the UK, a holding in online betting site Betfair, and a 24.5% share of Cannery Casino Resorts LLC.
Crown has also proposed to build a $1 billion six star hotel resort at Barangaroo, on the Sydney waterfront, which will include 350 hotel rooms, restaurants, a retail precinct and VIP casino facilities. Crown has signed an agreement with developer Lend Lease (ASX: LLC) to jointly develop the project. Crown needs Echo’s support (or a change of mind by the NSW government) to build a second casino in Sydney, with Echo holding the exclusive licence until 2019.
For income-focused investors, Crown has announced an interim dividend of 18 cents, franked to 50%. The company is spending a large sum of money on capital projects, including Barangaroo, expanding and refurbishing its Crown Perth casino at a cost of around $568 million, while Melco Entertainment is also expanding. Trading on a trailing P/E ratio of close to 17 times, and paying a partly franked dividend yield around 3%, Crown is no bargain, and investors might want to reconsider a gamble on the company.
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