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.
