SKYCITY Entertainment Group Limited and Crown Resorts Ltd: which should you own?

Casino stocks may benefit from higher consumer spending and a growing Asian middle class.

| More on:

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

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.

Foolish takeaway

I prefer Crown Resorts because of the demographics of where it is growing into and its drive to go overseas to follow business growth.

Motley Fool contributor Darryl Daté-Shappard does not own shares in any company mentioned. 

More on ⏸️ Investing

Close up of baby looking puzzled
Retail Shares

What has happened to the Baby Bunting (ASX:BBN) share price this year?

It's been a volatile year so far for the Aussie nursery retailer. We take a closer look

Read more »

woman holds sign saying 'we need change' at climate change protest

3 ASX ETFs that invest in companies fighting climate change

If you want to shift some of your investments into more ethical companies, exchange-traded funds can offer a good option

Read more »

a jewellery store attendant stands at a cabinet displaying opulent necklaces and earrings featuring diamonds and precious stones.
⏸️ Investing

The Michael Hill (ASX: MHJ) share price poised for growth

Investors will be keeping an eye on the Michael Hill International Limited (ASX: MHJ) share price today. The keen interest…

Read more »

ASX shares buy unstoppable asx share price represented by man in superman cape pointing skyward
⏸️ Investing

The Atomos (ASX:AMS) share price is up 15% in a week

The Atomos (ASX: AMS) share price has surged 15% this week. Let's look at what's ahead as the company build…

Read more »

asx share price competitions represented by businessmen arm wrestling
Retail Shares

How does the Temple & Webster (ASX:TPW) share price stack up against Nick Scali (ASX:NCK)?

How does the Temple & Webster (ASX: TPW) share price stack up against rival furniture retailer Nick Scali Limited (ASX:…

Read more »

A medical researcher works on a bichip, indicating share price movement in ASX tech companies
Healthcare Shares

The Aroa (ASX:ARX) share price has surged 60% since its IPO

The Aroa (ASX:ARX) share price has surged 60% since the Polynovo (ASX: PNV) competitor listed on the ASX in July.…

Read more »

asx investor daydreaming about US shares
⏸️ How to Invest

How to buy US shares from Australia right now

If you have been wondering how to buy US shares from Australia to gain exposure from the highly topical market,…

Read more »

person reading news on mobile phone
⏸️ Investing

Why Fox (NASDAQ:FOX) might hurt News Corp (ASX:NWS) shareholders

News Corporation (ASX: NWS) might be facing some existential threats from its American cousins over the riots on 6 January

Read more »