Crown Resorts CEO Steve McCann aiming to ramp up pressure on Blackstone to lift offer

Crown Resorts chief executive Steve McCann will on Monday hold the gaming group’s first investor day since it received an $8.5bn takeover offer from Blackstone in November.

Crown Resorts Chairman Ziggy Switowski, left, and chief executive Steve McCann. Picture: John Feder

Crown Resorts chief executive Steve McCann will on Monday hold the gaming group’s first investor day since it received an $8.5bn takeover offer from Blackstone in November as he ramps up pressure on the private equity giant to up its bid.

Equity analysts expect to upgrade earnings estimates after Mr McCann’s briefing, with JP Morgan suggesting a fully operational Barangaroo gaming floor would bring in $150m in additional revenues and $40m in earnings.

On the basis of their 2023 earnings forecasts, JP Morgan analysts Don Carducci and Michael James expect Crown’s share price to rise to $14.40, they told clients.

“Earnings expectations for (Crown) vary quite broadly; the current FY23 range implies anything from another lockdown to all-systems-go,” Mr Carducci and Mr James wrote last week.

“We believe the announcement of the investor so soon on the back of the most recent bid seems to offer the implication that the Investor Day will act as a catalyst for upwards revisions to expectations/forecasts. “

The additional revenue and earnings from Crown Sydney’s gaming operations would add 5 per cent or 6 per cent to consensus estimates in the 2023 financial year, the investment bank said.

“Clearly there are a number of factors to consider such as: what would now be a ‘normalised level’ post-Covid? Has consensus already factored in such earnings? When will gaming be fully operational? What level of growth can be achieved,” they wrote.

“However, what is clear, in our view, is that the recent bidding appears opportunistic, especially considering the potential upside a fully operational Barangaroo offers,” the note reads.

Crown in early December said the Blackstone bid – its third for the company – did “not represent compelling value”. But it has allowed Blackstone to access its books on a non-exclusive basis.

Blackstone’s bid, made on November 19, offers $12.50 cash per share – an increase of 15c from its previous offer. Crown Resort shares closed at $11.45 on Friday.

They had traded as high as $13 earlier in the year as several interested parties emerged.

So far, no other bidders have come forward with offers for the company, although as The Australian’s DataRoom column has previously revealed, rival gaming operator Star Entertainment has engaged Barrenjoey Capital Partners as it eyes a second attempt at its rival casino outfit.

JP Morgan’s Mr Carducci and Mr James have also put a $15 per share price target on Crown, with Credit Suisse analysts Larry Gandler and Bradley Beckett earlier suggesting it company was worth that price. That price assumed a “perfect execution” of a deal to split the company into an operating business and property-owning trust, they told clients. James Packer, who owns 37 per cent of Crown through his private Consolidated Press Holdings vehicle, has also been in direct discussions with Blackstone.

Mr Packer will have to sell his stake down to five per cent after directives from state regulators.

Crown’s Sydney gaming floors have remained closed at the request of the NSW independent Liquor and Gaming Authority.

In February, the Bergin report prepared for ILGA concluded there were significant governance issues at Crown.

The regulator is expected to hand Crown its operating license for Barangaroo – where the hotel and entertainment offerings are already open – in early 2022.

Mr Carducci and Mr James, in their note, said they expected Mr McCann to use Monday’s update as an “opportunity to clarify what represent(s) compelling value for Crown shareholders” means.

They expect earnings of $314m and revenues of $1.76bn for the financial year ending June 2022, up 1.7 per cent and 0.9 per cent respectively from earlier estimates.