Crown shares soar on change of strategy
Crown shares surged nearly 8 per cent yesterday to $12.29, on a day when the rest of the market slipped, as investors cheered with the casino giant launching a $500 million share buyback and declaring a special 83 cent special dividend.
The share price rally came despite Crown announcing its underlying profits fell 9.1 per cent to $191.3 million in the six months to the end of December. Revenue across its Australian resorts fell 12.5 per cent, due primarily to the reduction in the VIP program catering to high rollers who spend tens of thousands of dollars in a single hand.
As part of the changes, Crown’s chief executive officer Rowen Craigie has stepped down and the casino operator has abandoned plans to spin off some of its Australian hotels into an IPO of a separate real estate investment trust that it would have owned 49 per cent of.
Crown has also scrapped its planned spinoff of overseas assets and it has sold more than half its stake in Macau casino operator Melco Crown Entertainment Ltd.
The special dividend and buyback is funded by the Melco sale.
Crown said the Melco sell-down had reduced Crown’s debt and had provided it with a “range of capital management initiatives”.
Mr Craigie will be replaced by executive chairman John Alexander.
Another big change is in Crown’s dividend policy. Shareholders will now receive a fixed dividend of 60¢ a year, subject to financial performance.
These developments are part of the fallout from the crackdown on its activities in China which has seen its employees detained on the Chinese mainland for alleged gambling-related crimes.
Crown’s focus now is on its hotels and casinos in Australia.
Andrew Lappan, an investment adviser at Shaw and Partners in Sydney, said the rally in Crown’s share price was surprising given that the company’s results were “not so great”.
“VIP turnover doesn’t look like improving any time soon, but a A$500 million buyback does represent about 6 per cent of the company,” Mr Lappan told the Financial Times.
“The only positives are the special dividend and the buyback — which had already been flagged — and the company’s new dividend policy.”
by Leon Gettler, February 24th 2017
