Shares in casino and gaming companies on both sides of the Tasman hit blackjack yesterday with news that regulators had given the green light to deals proposed by James Packer-controlled Crown (ASX: CWN) and Auckland-based casino operator SkyCity Entertainment (ASX: SKC).
Crown, led by substantial shareholder and chairman James Packer, has been granted approval by the NSW Independent Liquor and Gaming Authority to increase the company’s stake in target Echo Entertainment (ASX: EGP) from 10% to up to 23%. Echo, which is also being pursued by billionaire KT Lim, jumped 2.5% with the potential increase in demand. The increased ownership would give Crown greater access to Echo’s Star Casino in Sydney, a current monopoly with a casino licence until 2093.
Both Crown and Echo are vying for controlling access to the Sydney’s entertainment market, with each company set to submit proposals of the city’s gaming future to an independent committee. Packer’s proposal involves building a new $1 billion resort and casino complex, designs for which he believes could create “the most iconic building… since the Opera House”. Echo meanwhile is proposing to spend hundreds of millions of dollars to refit its Star Casino in return for an extension of its monopoly position. Submissions close on 21 June.
On the other side of the Tasman, SkyCity Entertainment finally announced details of the NZ$400 million deal it has completed with the NZ government to build a national convention centre in Auckland. The company, which operates a flagship casino in Auckland as well as others in Adelaide and Darwin, will foot the bill for the convention centre in return for a 27-year extension to its casino licence to 2048 as well as approval for an additional 40 gaming tables and 230 slot machines.
But the real winners from further gaming investment is likely to be the manufacturers and servicers of gaming equipment, including Aristocrat Leisure (ASX: ALL) and Ainsworth Game Technology (ASX: AGI), as increased floor space and new gaming establishments get filled with their products.
Shares in Crown and SkyCity have been on a tear over the last 12 months, up 44% and 28% respectively. But both companies pale in comparison to the appreciation put on by by AGI, up 122% and closing yesterday at $4.12. Ainsworth grew revenue by 41% in the half year ended 31 December 2012 and investors will be keeping a keen eye on the company to see if it can be repeated in 2013.
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