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Newsletter

Crown Resorts: Price movements not reflective of credit fundamentals

Both the share price and subordinated notes have recently experienced a rebound in their price:

  • The share price has recovered from $8.99 on September 30th to above $12 currently;
  • Crown Subordinated Notes are trading back above par ($100) after having reached a low of $98 on 15 September 2015;
  • Similarly Crown Subordinated Notes II are trading back at $93, after having reached a low of $87.50 on 11 September 2015;

 

The recent price movements have been a result of positive news surrounding China relaxing its transit visa to Macau and  the the award of gaming tables to Macau Studio City. However, we maintain our recommendations at Sell on both Crown Sub Notes. While the prices have rallied there is no fundamental change to our thesis:

  1. Recent statistics show the Macau gaming sector is continuing to struggle (Source: Gaming Inspection and Coordination Bureau Macau www.dicj.gov.mo);
  2. Macau promoters face fresh headwinds to attract VIP/high rollers to their casinos as the government regulator is considering a crackdown on junket operators, which facilitate loans to VIP gamblers. Neptune Group, one of Macau’s largest junket operators, issued a warning that it might need to scale back its operations because of the decline in the city’s gaming revenues and another junket operator (Dore) is being investigated for fraud;
  3. There are suggestions that a ramp up in China’s restrictions on capital flight could further impact Australian casino revenues and severely limit the amount of money that wealthy Chinese are able to put into Australian gaming venues and therfore reduce the number of Chinese nationals visiting Australian casinos.

Macau Gross gaming revenues 2015

 

Consequently, we retain our SELL recommendations on both the Crown Subordinated Notes (CWNHA) and the  Crown Subordinated Notes II (CWNHB)