When investing sometimes we have to look at several stocks that are similar in size or performance and then decide which is going to give us more growth. We could be wrong in the long term, but the decision still has to be made on what we know now. Adjusting along the way is allowed though.
I want to look at leisure and entertainment stocks, especially casino stocks. Even if you are not a big fan of betting yourself, casino stocks can gain from higher discretionary spending. Here are two well-known companies that I want to compare and see which may be a better earner, not wager, for you.
Integrated resorts and casino operator Crown Resorts Ltd (ASX: CWN) has more opportunities to grow, in my opinion, because it is going outside of Australia where the real casino action is. Likewise, it is taking advantage of the demand for world-class tourism sites in both Sydney and QLD, attempting to expand into areas that were previously restricted to it.
Comparing it directly to SKYCITY Entertainment Group Limited (ASX: SKC) in some basic areas like profit margins, return on equity and return on capital, SKYCITY has higher figures by a few percentage points apiece. Yet when looking at earnings per share growth, the big difference comes out.
Crown Resorts earned 50.4 cents per share in 2007 and in 2013 EPS was 67.4 cps. Over the same period SKYCITY was 19.5 cps in 2007 to 19.9 cps in 2013. The GFC affected both of them, but Crown recovered faster and moved forward.
SKYCITY is remodeling and upgrading its venues in Adelaide and Auckland, so it should see better margins when they are complete. It is also planning to build a new $400 million convention centre in Auckland which could bring in more tourists to the new site and casino.
In Crown’s case, it is ready to open its new City of Dreams casino in Manila in mid-2014. Its joint venture company Melco Crown is developing it and it has intentions to build several more in other Asian countries. The large population of the region and a growing middle class offer many more opportunities.
I prefer Crown Resorts because of the demographics of where it is growing into and its drive to go overseas to follow business growth.