Is Crown Resorts Ltd a buy at this share price?

The Crown Resorts Ltd (ASX: CWN) share price is currently trading at around $13.05, virtually unchanged from a year ago, but there are a few reasons why the company’s shares might be a buy now.

For those readers unfamiliar with Crown, the company owns and operates a number of casinos and entertainment/hotel complexes, including Crown Melbourne and Crown Perth. Crown is also building a VIP-only casino and hotel complex at Barangaroo on Sydney’s waterfront and owns Crown Aspinall’s – an exclusive high-end casino in London.

Additionally, Crown owns 27.4% of Melco Crown Entertainment (MCE), which has several casinos in Macau and one in the Philippines. Crown is also looking to add a casino in Los Vegas to its list. Last but my no means least, Crown also owns a number of wagering and online gambling properties, an interest in social gaming company DGN Games, 50% of Aspers Group – which operates regional casinos in the UK, 24% of Cannery which operates US casinos, as well as a number of smaller assets.

Here are two primary reasons why the company could be a buy…

  1. Crown has proposed demerging its international investments into a separately listed holding company, with Crown retaining Melbourne, Perth, Sydney, Aspinalls and its wagering and online investments.The demerger could create more shareholder value, and increase transparency of the assets and operations of the two entities – according to Crown. Demergers tend to create value for shareholders and the demerged entity often goes on to outperform its parent.Crown is also looking at an IPO of a 49% interest in a property trust which would own Crown’s Australian Hotels. That could also realise further value for shareholders.
  2. A two-year slump in gaming revenues at Melco Crown’s Macau properties could be over according to Bloomberg. In 2014, Chinese regulators imposed new rules to clamp down on corruption and restrictions on Chinese using credit cards to finance their betting, which drove big spenders away. As a result, house prices in Macau slumped, along with gaming revenues.According to Macau-based Tom Ashworth, principal of Sniper Capital Ltd, which manages the London-listed Macau Property Opportunities Fund, “There is almost a direct correlation between the decline in gaming revenues and pricing in the mass residential market. There are signs of a pick up, with the market potentially at a bottom,” he told Bloomberg.Macau’s top government official, Fernando Chui has also told Bloomberg that he thinks the economy could resume growth in 2017.

Foolish takeaway

Now might be the perfect time to take a punt on Crown.

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Motley Fool writer/analyst Mike King doesn't own shares in any companies mentioned. You can follow Mike on Twitter @TMFKinga

The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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