Crown Limited is an Australian company that operates in gaming and entertainment industry. Its primary business is concentrated in Australia where it owns and operates two large resorts in Melbourne and Perth. Each of the resorts provides hotel, entertainment and gaming services. Crown Limited also holds 50% interest in large casinos in United Kingdom, Canada and Macau. The company has conducted IPO at the end of 2007 and its stock is traded on Australian Exchange under the ticker of CWN. The performance of company’s stock against the Australian market index AUX200 during the most recent 6 months is shown in the Figure 1.
Figure 1: Stock performance of Crown Limited compared to the Australian Market Index. Source: Yahoo Finance.
As it can be readily observed from the graph, the performance of CWN (blue line) is very similar to the performance of AUX 200 index (orange line) with respect to the higher volatility of Crown stock. During April 2011 both market index and CWN price attained a long-term maximum which changed for a gradual decline over the next month. This decline is merely attributed to the global macroeconomic uncertainty and seasonal decline of business activity on the markets. However, the decreasing trend changed to the increasing in June 2012 and remained until at least October 2012. There were two instances when returns on CWN stock significantly exceeded returns on AUX 200 – in the middle of June 2012 and in the middle of August 2012. The former is attributed to the rumours of merger between Crown and Echo (which is the second large gaming operatior in Australia) and $455 million capital raise by Echo (Foley & Fickling, 2012). The latter is attributed to the successful capital raise by Crown (McDonald, 2012).
The closing price on the first day of the observation period was $8.80 while on the last day it was $9.24, which implies tracking period gain of (9.24 – 8.80)/(8.80) = 0.05 or roughly 5%.
Since the company performance was very close to market performance during the observation period, it is a strong bet. Although it is highly unlikely, that the stock will significantly underperform the market, it is also unlikely that it will bring large abnormal profits. Therefore, we decide to assign “Buy” rating to this stock.
According to the most recent annual report, net profit of Crown limited for the financial year ended 30 June 2012 was $513 million while total assets were almost $5.9 billion. The latest dividend was paid on 28 September 2012 in the amount of $0.19 per ordinary share.
Foley, B. & Fickling, D., 2012. Echo to Raise A$454 Million by Selling New Shares. Bloomberg. [Online] Available at: < HYPERLINK “http://www.bloomberg.com/news/2012-06-14/echo-to-raise-a-454-million-by -selling-new-shares.html” http://www.bloomberg.com/news/2012-06-14/echo-to-raise-a-454-million-by- selling-new-shares.html >
McDonald, S., 2012. Crown Plans to Sell A$400 Million of Subordinated Listed Notes. Bloomberg. [Online] Available at: < HYPERLINK “http://www.bloomberg.com/news/2012-08-13/crown-plans-to-sell-a-400-mill ion-of-subordinated-listed-notes.html?cmpid=yhoo” http://www.bloomberg.com/news/2012-08-13/crown-plans-to-sell-a-400-milli on-of-subordinated-listed-notes.html?cmpid=yhoo …
Posted by: Regina Kauzlarich