Good thing for James Packer that Macau exists because his home markets in Australia are struggling to overcome the effects of a down economy and intensifying competition for high-rollers.
Mass-market gaming revenue for Mr Packer’s Melbourne-based Crown Resorts dipped 0.6% to A$757.7 million in the six months ended 31st December.
“We have seen weak consumer sentiment” that’s hurt trading, said Rowen Craigie, chief executive of ASX-listed Crown. “Their local economies are experiencing structural and cyclical challenges.”
The company was able to grow EBITDA by 27% to $479 million in the half on group revenue that rose only 3.4% to $1.56 billion. Turnover from VIP gamblers slumped 26% to $23 billion and was down 33% at the company’s flagship Crown Melbourne amid what the company described as “competitive challenges”.
“It’s slightly worrying what’s happening in the VIP market,” Killian Murphy, an analyst at CIMB Group Holdings in Sydney, told Bloomberg. “The casinos round the region are all very competitive and it’s a small pool of players.”
Australian casino companies are counting on growing demand from high-spending Chinese and other Asian tourists to justify more than A$2 billion in investments in new hotels and casinos. Crown has committed $1.3 billion to a luxury resort aimed at VIPs on Sydney’s Darling Harbour to compete with Echo Entertainment’s The Star, the locus of $870 million in reinvestment over the last few years designed to enlarge its share of that same market.
Crown saw net income more than double year on year to A$382.5 million in the half, but it fell short when adjusted for volatility of the $328.7 million median forecast of four analysts polled by Bloomberg News.
And more than 40% of it was generated from Crown’s one-third stake in Macau casino giant Melco Crown Entertainment, a return that more than doubled over the first half of 2012.
“The domestic side is tracking OK at best, given the weak consumer environment,” said Theo Maas of Arnhem Investment Management in Sydney. “The real growth is coming from Macau.”
It was enough to enable the company to declare a 50% franked dividend of 18 cents, even with last year’s interim payout.
More good news for Mr Packer, who owns just over 50% of Crown and will pocket $65.6 million.
The dividend will be paid on 11th April.
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