Last week shareholders including one of Australia's richest people, billionaire James Packer, watched on as the share price of leading casino operator Crown Resorts Ltd (ASX: CWN) fell 5.3%. The price decline took the stock to a new 52-week low of $12.99, before ending the trading session on Friday at $13.10.
Last week's fall extended the decline over the past 12 months to 20.5%. In comparison, the S&P/ASX 200 (Index: ^AXJO) (ASX: XJO) slipped 2.2% last week and is still holding onto a 0.65% gain for the year.
Significant underperformance
While the longer-term performance of Crown over both five and seven-year time frames remains good, the recent underperformance of the stock will no doubt have some shareholders concerned.
One of the causes of concern has been the steep drop in the share price of Melco Crown – it's down around 40% in the last 12 months. Melco has seen a tightening of regulations by authorities in Macau, which appears to be putting pressure on its operations.
Future looking brighter
While some of Crown's overseas operations are currently under a cloud of uncertainty, closer to home business still appears pretty good.
Last week the group announced plans to build a new five-star hotel in Melbourne to meet tourism demand. Crown has secured parcels of land which adjoin the group's current Crown Melbourne properties for an initial investment of $50 million.
The planned expansion in Melbourne adds to the already underway major development in Sydney, which will see it compete directly for the first time against peer Echo Entertainment Group Ltd (ASX: EGP). Combined, both projects will significantly boost Crown's footprint on the eastern seaboard.
Appealing valuation
According to analyst consensus data from Morningstar, earnings per share (EPS) are forecast to decline slightly to 86.5 cents per share (cps) in financial year (FY) 2015, before jumping in FY 2016 to 101.5 cps. The dividend meanwhile is expected to track higher to 39.5 cps in FY 2015 and then to 43.1 cps in FY 2016.
Based on Friday's close this puts the stock on a price-to-earnings (PE) ratio and dividend yield of 15.1x and 3% respectively in FY 2015, and 12.9x and 3.3% respectively in FY 2016.
