Citi analysts see value, scope in Crown Resorts

By Trevor Hoey. Published at Jan 16, 2017, in Features

While shares in Crown Resorts (ASX: CWN) have staged a solid recovery since hitting a 12 month low of $10.31 in November there could be further upside from Friday’s closing price of $11.75.

Analysts at Citi noted on Monday morning that Melco Crown (MPEL), in which Crown has an 11.2% equity stake, had declared a US$650 million special dividend to be paid on or around February 10, 2017 to shareholders on the register as at January 23, 2017.

Aside from this development Citi has lowered its VIP revenue assumptions, adjusted projections for Crown’s lower equity stake in MPEL and adjusted forecast shares on issue to incorporate the buyback, resulting in a lowering of its earnings per share estimates between fiscal years 2017 and 2019 by between 2% and 3%.

Notwithstanding the trimming of its earnings forecasts, Citi increased its valuation and price target from $12.75 to $13.15 and maintained its buy recommendation, noting that the group is trading on circa 9.3 times fiscal 2017 EBITDA projections, a discount to the market (10.3).

Citi also highlighted the fact that the company has yield and near term capital management appeal with the prospect of further de-leveraging from potential strategic initiatives.

The company’s shares opened at $11.80 on Monday morning, up from Friday’s close of $11.75.

It should be noted that broker projections and price targets are only estimates and may not be met. Also, historical data in terms of earnings performance and/or share trading patterns should not be used as the basis for an investment as they may or may not be replicated. Those considering this stock should seek independent financial advice.

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