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Crown Resorts share price plunges as Chinese high-rollers stay away

Mon, Nov 19, 12:28pm by Staff Writer

A downturn in VIP and premium business at James Packers’ casinos has seen the casino magnate lose more than A$800 million.

Crown Resorts’ share price has plummeted almost 20 per cent since mid-August as the lucrative Chinese high-roller gamblers are turning their backs on casinos in the midst of a slowing economy and trade war with the United States.

Mr Packer’s 46 per cent stake in Crown Resorts, held by Consolidated Press Holdings is now valued at A$3.7 billion after the price drop.

In August, Crown Resorts share prices were near $14.50 per share. They are worth $11.67 per share today.

Wynn Resorts also hit hard

Las Vegas based Wynn Resorts has also seen a downturn of its business in Macau, with the company warning that since last month’s Golden Week holiday in China, the market has softened.

Its shares tumbled 15 per cent, with the business doing 70 per cent of its work in Macau.

“Since Golden Week we’ve noticed that during the mid-week its been quite choppy and the weekends have been sporadic,” chief executive of Wynn Resorts Matt Maddox said.

A contraction in the Macau market is hitting the company’s bottom line, with Wynn noticing softer performances in its Singapore and Las Vegas markets as well.

“What we’ve always focused on in our business is the premium end, and we always will because in Macau while that will be the first to retract in these times, it’s also the first to expand as you come out of these slowdowns” Maddox told CNBC.

It is not the first time that revenue from Macau casinos have taken a hit, with revenue down as much as 50 per cent in 2014 and 2015 amid a crackdown on corruption in Macau.

VIP and wealthy gamblers shying away from casinos

At the time, Australia’s casino businesses benefited from that. Wealthy Chinese gamblers sought overseas resorts to continue their gaming, with Crown reporting strong international VIP growth at both its Melbourne and Perth resorts. This was despite a downturn in Macau, which it left in December 2016.

Crown is still rebuilding its business after a number of arrests of staff in China in 2016, with high rollers treading carefully at Australian casinos.

Although VIP turnover was up 13 per cent on the previous quarter in results released in November 1, it was well below the 28 per cent rise that was expected in the first half of the year.

Crown has seen just a one per cent or less rise in domestic operations, compared to its rival Star Entertainment group that has a 6.7 per cent rise during the same time frame.

Crown has made an investment into Sydney and there is an expected increase in market share for Crown as it aims to generate A$18 billion in VIP turnover and A$122 million in table revenues following the new resorts completion in 2021.

Crown Sydney set to deliver dividends for investors

Goldman Sachs valued Crown’s yet-to-be-completed Sydney project at A$1 billion.

“We believe the market will begin to factor in Crown Sydney’s earnings to the share price in the coming months, with the project nearing two years from completion,” analyst Nick Basile said.

The Star Group takes 31 per cent of its revenue from the VIP segment compared to just 23 per cent at Crown.

Crown is expected to increase its VIP revenue to 29 per cent for the 2021 financial year.

VIP turnover in Australia and New Zealand was A$2 billion lower in 2018 than in 2016.

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