Crown Resorts asset sales to aid Australian casino bet

Crown’s sale of over $700m in assets is tipped to push it into a net cash position next year and help fund Australian casinos.

Artist’s impression of Crown’s Barangaroo project in Sydney.

Crown Resorts’ plan to sell more than $700 million of assets is tipped to push the company into a net cash position next year and help fund investment in its Australian casinos.

The James Packer-backed company surprised the market last night with news of several transactions underway to reduce its exposure to international assets and non-casino interests. The sales include its Las Vegas property and also two floors of its Crown Sydney casino project to Mr Packer for his future Australian home.

Investors have backed the asset sales, with shares in the company up 3.45 per cent in midmorning trade at $12.88.

JP Morgan analysts did the numbers on Crown and outlined that around $687 million of potential proceeds from asset sales would move Crown to a net cash position in fiscal 2018, which it said would provide the company an opportunity to invest in the business.

“The sale of the global and non-casino assets will allow Crown to focus on enhancing its core operations,” the analysts said.

“The asset sales would represent significant progress along Crown’s debt reduction strategy.

“We currently estimate fiscal 2018 net debt of $266m, which would result in a net cash position if all the announced asset sales materialise in the second-half of fiscal 2018.

“Crown will significantly reduce its international exposure and non-casino exposure with the announced asset sales, allowing it to focus on improving its offering in the key domestic casino segments — especially Perth — as VIP business moderates and main gaming floor performance becomes a key driver of growth.”

On Mr Packer’s purchase of two levels in the Crown Sydney resort development, JP Morgan said it signalled the billionaire’s commitment to developing domestic operations in the harbour city.

Crown said it had reached an in-principle agreement with Mr Packer to sell two floors of the residential component of its Sydney resort, for $60m. Mr Packer said in October that he was designing an apartment in the $2.4 billion complex that would be his new home and would mark a permanent return to his homeland when the ­project was completed in three years.

Artist's impression of one of the residences in the Crown Sydney building.

Mr Packer’s Australian-listed company also noted yesterday that it was in talks to sell its 62 per cent interest in online bookmaker CrownBet, which is mooted could be worth $150m.

JP Morgan analysts said the sale of CrownBet would remove the group’s key organic growth opportunity.

“CrownBet was expected to be the key driver of organic growth for the group, as well as a way to diversify risk in times of challenged VIP conditions in casinos,” the investment bank’s analysts said.

“Crown’s wagering and online division revenue grew 32 per cent in fiscal 2017, with a majority contribution from CrownBet.”

On the planned sale of its CrownBet interest, Macquarie’s analysts said they estimated that the wagering arm had a 6 per cent share of Australian wagering revenue in fiscal 2017, which was up from 4 per cent in fiscal 2016.

Sportsbet and William Hill are said to be in talks about a potential transaction with CrownBet and Macquarie has valued the company at $450m.

Crown Resorts revealed yesterday that its asset sales included the $US300m ($390m) sale of its Las Vegas land. Alon Las Vegas Resorts, which is a majority owned subsidiary of Crown, will sell its interest in a 14-hectare vacant site on Las Vegas Boulevard to a subsidiary of Wynn Resorts.

Mr Packer had long held ambitions for a ­successful Las Vegas project and in 2014 Crown bought that land, which was next to a casino owned by Steve Wynn. Challenges in financing slowed the planning and Crown flagged last December that it was looking for a buyer for its Las Vegas asset.

As part of the asset sales revealed yesterday, Mr Packer’s private investment vehicle, Consolidated Press Holdings, and an entity associated with his sister Gretel will pick up Crown’s interest in the Ellerston property in NSW’s Hunter Valley region for $62.5m.

The property — bought by Kerry Packer in 1972 and featuring a Greg Norman-designed golf course, luxury accommodation, go-kart track, cinema and several swimming pools — was to be made available for Crown’s high-rollers when its casino at Barangaroo in Sydney opened.

“Following completion of the (Ellerston) sale, Crown will have ongoing access rights to the golf course and other facilities at Ellerston in line with its commitment to the NSW government,” Crown said yesterday.

The casino company has been on an aggressive cost-cutting drive this year and has rolled back its once grand global plans. Its three main assets are all in Australia — Sydney, Melbourne and Perth.

The cost-cutting came after the company paid a heavy price following the arrests last year of its staff in China — a move that hit its lucrative VIP business. It also exited its Macau interest after the China arrests and has played down the prospects of pushing for a casino licence in Japan.

The group also axed sponsorships of the nation’s top rugby league teams and sporting stars, the Spring Racing carnival, reviewed its fleet of private jets and cut staff.

Mr Packer, in an exclusive interview with The Australian in October from his polo ranch in Argentina, said his company was focused on reducing costs and getting back to basics.

He said his business might no longer be as big as he hoped it would be but it was still a very meaningful business with the Perth, Melbourne and Sydney properties.

The debt reduction plan could also be boosted by the sale of shares in Caesers Enterainment, which could net $US54m.