Why Crown Resorts Limited’s share price just rose 4% on its result

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The Crown Resorts Limited (ASX: CWN) share price has risen by 4% in early trade after it reported its half-year result for the six months to 31 December 2017.

Crown Resorts is the operator of Crown Melbourne, Crown Perth and Crown Aspinalls.

Below are some its highlights compared to the prior corresponding period.

Crown reports its normalised results to adjust for and exclude the impact of any variance from the theoretical win rate on its VIP program play. Crown thinks this is the best measure of performance, as it removes the volatility of VIP gaming revenue.

In its key Australian Resorts segment Crown grew normalised revenue by 4.8% to $1.55 billion, with main floor gaming revenue up by 0.7% to $859.6 million and non-gaming revenue up by 6.6% to $390.1 million. Australian Resort normalised earnings before interest, tax, depreciation and amortisation (EBITDA) grew by 3.4% to $454.1 million.

The Australian Resorts saw VIP program play turnover of $22.6 billion, which was an increase of 15.9%. This was good to see after the Chinese debacle last year where several Crown employees were arrested, which scared off a lot of Chinese VIP high-rollers.

Crown’s total normalised EBITDA grew by 11.2% to $447.7 million and normalised earnings before interest and tax (EBIT) grew by 15.2% to $297.7 million.

As expected, Crown declared an interim dividend of 30 cents per share, franked at 60%. This matches management’s intention to pay annual dividends of 60 cents per share.

Normalised net profit after tax (NPAT) attributable to Crown shareholders grew by 0.6% to $192.4 million.

However, reported NPAT fell by 33.6% to $238.6 million after significant items were taken into account. The main reason for the fall was that the previous period included a $166.9 million net gain on the sale of its share of Melco Resorts & Entertainment.

Management reminded investors that Crown intends to implement its on-market share buy-back of up to 29.3 million shares on or after 23 February 2018.

During the half Crown entered into an agreement to sell its 34.6 acre vacant site on Las Vegas Boulevard for US$300 million to a subsidiary of Wynn Resorts Limited. The gain on this sale is US$83.8 million. The sale was completed with an announcement on 29 January 2018.

Crown has also sold its interest in part of the property and operations at Ellerston in the Hunter Valley for $62.5 million, this was completed on 2 February 2018. Crown also completed the sale of its 4.2 million shares in Caesars Entertainment Corporation for US$53.3 million.

Finally, Crown has entered into an agreement to sell its 62% stake of CrownBet, as well as the loans advanced to it, for $150 million.

Management also gave an update on its two large projects.

Construction of the Crown Sydney Hotel Resort is progressing on schedule with the tower foundations complete, the main structure starting to rise and approximately 75% of the total trade subcontract value awarded under fixed price contracts. It aims to open during 2021 and Crown is starting to sell some of the apartments there.

The new six-star hotel in Melbourne, called One Queensbridge, has received conditional planning approval for the planned 388 room hotel and around 700 apartments. The hotel still requires financing and long-form agreements.

Crown Executive Chairman, Mr John Alexander, said “Crown’s Australian operations’ first half result reflected mixed trading conditions…VIP program play turnover in Australia of $22.6 billion (up 15.9%) was a pleasing outcome, particularly at Crown Melbourne (up 37.5%), given the difficult trading conditions in the prior corresponding period.”

Foolish takeaway

Overall, I thought this was an encouraging report after the troubles it has suffered over the past year or two. It could grow over the long-term with its Sydney project and it could be a decent income stock in the short-term with a partially franked dividend yield of 4.62%.

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Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Crown Resorts Limited. 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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