The battle between our casino operators represents one of the most notable reversals of fortunes among large-cap stocks in recent times.
Shares in Echo Entertainment Group Ltd (ASX: EGP) jumped 1.7% to a record high of $4.92 this morning as it scored a big goal against Crown Resorts Ltd (ASX: CWN) in Brisbane – taking Echo's share price gain over the past 12 months to 54%.
In contrast, Crown has shed 13% of its value over the past year and news that it lost the $2 billion bid to Echo Entertainment to build an integrated resort and entertainment precinct at Queen's Wharf will likely keep Crown trading at a steep discount to its rival.
This isn't only because of the loss of the opportunity but because the Queen's Wharf development will have flow on implications for Crown.
The Queensland government selected Echo Entertainment because the consortium led by the company was ready to start right away, according to the Australian Financial Review.
The project will begin in late 2016, and while no completion date has been given, it should be finished a little after the time Crown opens its Barangaroo casino resort in Sydney in 2019.
Queen's Wharf could steal some of Barangaroo's thunder and to make matters worse, the Echo Entertainment consortium is well placed to take Chinese punters away from Macau as the consortium's other two members are Hong Kong-based hospitality giants Chow Tai Fook Enterprises and Far East Consortium.
One of the key reasons why Crown's share price has underperformed so badly is because its joint venture Melco Crown Entertainment has been hit hard by a sharp drop off in the number of Chinese high-rollers visiting Macau since the Chinese government cracked down on corruption.
It hasn't always been the case that Crown's shares lagged Echo Entertainment. If anything, the situation was quite the opposite in 2013 when investors dumped Echo Entertainment shares for Crown after the latter won the Barangaroo project, which threatened Echo's casino monopoly in Australia's largest city.
The big question is whether now is the time to rotate out of Crown for Echo Entertainment. If history is anything to go by, that might be too late as you certainly would be crying if you sold out of Echo Entertainment when it was trading at a low in 2013 and Crown was at a high.
The fact is, a lot of good news is priced into Echo Entertainment and there's a lot less room for the company to make mistakes while the opposite is true for Crown.
I think at this juncture there is more compelling value in Crown and its chairman James Packer certainly thinks so as he is said to be mulling a privatisation bid for the company.
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