MENU

Crown Resorts Ltd vs Echo Entertainment Group Ltd: Which is the better buy?

How things have changed for Crown Resorts Ltd (ASX: CWN) and Echo Entertainment Group Ltd (ASX: EGP) shareholders. 2013 was the year to hold Crown, as its share price rocketed 60% in 12 months when investors finally embraced the growth possibilities of the company. Echo shareholders meanwhile, suffered through a 30% loss as the group’s Brisbane casinos underperformed and it lost out on the contract to build the new Barangaroo casino in Sydney.

Outperformance

2014 has been a completely different story! Crown shares are down 11% for the year and Echo’s are up 30%. The reason for this has been an earnings revival at Echo’s Brisbane and Sydney casinos, new expansion and revitalisation plans, and an asset sale which should help to fund these plans.

What’s Going On?

I think Crown’s performance has been more of a hangover from 2013, rather than any troubling operational concerns. Crown remains one of the best growth opportunities on the market and delivered full-year results that beat analysts’ expectations. The main concerns have stemmed from a slow-down in growth at the group’s Macau-based joint venture where visitor growth has slowed. This has forced investors to reconsider short-term growth projections, but the long-term story remains the same.

Which is Best?

Echo’s Star casino in Sydney is showing promising signs after the company invested in new machines and games. Also, redevelopment of Jupiter’s casino on the Gold Coast should be a catalyst for growth over the next 24 months.

Crown meanwhile, has one of the strongest growth pipelines of all companies on the ASX. Crown is (either directly or via its subsidiaries) investing in new casinos in Macau, Sri Lanka, Las Vegas, and Sydney, and is in the running to develop new casinos in Brisbane and Japan.

It’s a close call, but I believe the risk vs. reward equation works out better for an investment in Crown. Echo is a more defensive offering, owing to its purely domestic assets and few major growth prospects, while Crown is certainly a growth stock, but is priced accordingly. The success or otherwise of Crown’s upcoming investments will determine the future price direction, whereas Echo will rely more heavily on operational performance and upgrades to existing facilities.

These two companies are excellent picks for investors that are getting nervous about the lofty share prices of Commonwealth Bank, Westpac, NAB and ANZ! Get the inside scoop on YOUR bank shares in The Motley Fool's investment report, "What Every Bank Shareholder Must Know". It's FREE and completely updated with new information! Click here for your copy.

Motley Fool contributor Andrew Mudie does not own shares in any companies mentioned. You can find Andrew on Twitter @andrewmudie

Two New Stock Picks Every Month!

Not to alarm you, but you’re about to miss a very important event! Chief Investment Advisor Scott Phillips and his team at Motley Fool Share Advisor are about to reveal their latest official stock recommendation. The premium “buy alert” will be unveiled to members and you can be among the first to act on the tip.

Don’t let this opportunity pass you by – this is your chance to get in early!

Simply enter your email now to find out how you can get instant access.

By clicking this button, you agree to our Terms of Service and Privacy Policy. We will use your email address only to keep you informed about updates to our website and about other products and services we think might interest you. You can unsubscribe from Take Stock at anytime. Please refer to our Financial Services Guide (FSG) for more information.