The company now known as Crown Resorts Ltd (ASX: CWN) finished 2013 in a much stronger position than it started. As well as changing name from Crown Ltd to Crown Resorts Ltd in October, it received provisional go-ahead from the NSW State Government to build a new six-star luxury resort at Barangaroo in Sydney, and finished the year well on its way to delivering upgrades to its flagship Melbourne and Perth casinos.
Crown is adding a 500-room six-star hotel to the existing Crown Perth in Burswood, at a cost of $568 million. The hotel is due to open in 2016 and is expected to bring an additional 79,000 visitors and $60 million tourist dollars per year. Crown is also spending $100 million upgrading its gaming floors at the Melbourne Crown Casino.
Management noted in its October AGM that both of these upgrades had hampered earnings growth in the first six months of the 2014 financial year. Main floor gaming revenue was flat, while VIP gaming revenues were up 10%.
Projects for 2014 and beyond
Crown has a number of exciting, but capital intensive, projects coming up. The most prominent is the luxury six-star resort at Barangaroo, which will include VIP gaming facilities, 350 hotel rooms and suites, luxury apartments, restaurants, bars, retail outlets, pool and spa facilities and conference rooms.
The group is also hopeful of finalising a deal with the Sri Lankan government for a five-star resort with 450 rooms and suites, restaurants, entertainment offerings, gaming areas and retail outlets. In an original naming choice, the development is proposed to be called Crown Sri Lanka and would provide 2,500 local jobs.
Finally, Crown’s Asian joint venture, called Melco Crown (NASDAQ: MPEL), is expected to look at developing a casino in Japan to expand its portfolio away from Macau.
On a side-note; Crown’s investment in Melco Crown has been an excellent choice thus far, with Crown’s US$600 million investment for 34% of the company now worth US$7.6 billion. This represents over half of Crown’s market cap of A$12.27 billion which could mean that investors are undervaluing the group’s other assets.
Crown has a great growth profile ahead of it with a few extremely exciting projects either started or ready to start soon. Unfortunately this has hampered the company’s ability to payout dividends; Crown has capped the payout at the current 37 cents per share for the foreseeable future, and it has remained constant for the past four years. This translates to a dividend yield of around 2.2%, but Crown is an investment for growth and exposure to Australian tourism, which should be boosted by a lower Australian dollar. Crown is also run by the Packer family, which has an exceptional record at creating value for shareholders.
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