It was a similar story for Star Entertainment Group Ltd (ASX: SGR) shares, which leapt 10.16% higher yesterday. So, do these double-digit share price gains mean wagering shares like Crown are back in the buy zone?
Why Crown shares surged higher on Wednesday
The big news of the day was a significant purchase of Crown shares from private equity group, Blackstone.
The wagering group announced that Blackstone has purchased 67,675,000 shares in Crown. That represents a 9.99% stake of Crown’s issued capital, purchased from Melco Resorts & Entertainment Limited for $8.15 per share.
Melco is the Macau-based group run by Lawrence Ho, which controversially purchased the stake from James Packer in June 2019.
The Blackstone purchase booked Melco a $330 million loss but provides more certainty for Crown going forward. Investors were bullish on the news with Crown shares rocketing 10.93% higher to $9.54 per share.
There was no similar announcement for Star Entertainment but that didn’t seem to matter. Star shares closed 10.16% higher and I think it’s a case of positive signalling. If a firm as experienced and successful as Blackstone is willing to buy in, it’s a big vote of confidence for the industry.
Is now a good time to buy?
It’s easy to look at a 10% share price gain and think you missed the boat. However, it’s important to remember that investing is for the long-term.
With coronavirus restrictions starting to be rolled back, it could be a good time to buy Crown shares. I still think it’s too early to tell what the long-term impact will be on the wagering industry and Crown’s business model.
However, it’s historically been a strong ASX dividend share and could well return to those levels in 2021.
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Motley Fool contributor Ken Hall has no position in any of the stocks mentioned. The Motley Fool Australia 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 Scott Phillips.
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