Crown Resorts (CWN ASX) have a one-year performance of 20%. Crown Resorts also have multiple factors influencing the share price currently, including a royal commission and acquisition. So we take a look into CWN ASX and ask, Should I be buying Crown Shares in 2021?
CWN ASX Fundamentals:
Back in June 2020, CWN ASX was trading on the ASX at a price of $10share and a market capitalization of $6.7billion. Today CWN is trading up to $12.22/share and a market cap of over $8billion.
About Crown Resorts CWN ASX
Crown Resorts is one of Australia’s largest entertainment groups and makes a major contribution to the Australian economy through its role in tourism, employment, training, and its corporate responsibility programs.
Crown’s core businesses and investments are in the integrated resorts sector.
In Australia, Crown owns and operates three of Australia’s leading integrated resorts, Crown Melbourne and Crown Perth, as well as Sydney’s latest premium hotel resort and dining precinct at Crown Sydney.
Overseas, Crown owns and operates Crown Aspinalls in London, one of the high-end licensed casinos in the West End entertainment district. Crown also holds a 50% equity interest in the UK-based Aspers Group and a 20% interest in Nobu.
Crown has interests in various digital businesses, including Betfair Australasia (100%), DGN Games (100%), and Chill Gaming (50%).
Blackstone submits Offer for Crown Shares
On the 22nd March 2021, Blackstone Group submitted an unsolicited, non-binding, and indicative proposal from a company on behalf of the funds managed and advised by Blackstone Group. The indicative price of $11.85 cash per share represented a premium of 19% to the volume-weighted average Crown Share Price at the time.
Blackstone currently has an existing shareholding in Crown Shares of 9.99% which it acquired from Melco Resorts for $8.15 per share back in April 2020.
The Crown Board has not yet formed a view on the merits of the Proposal by Blackstone.
Crown Half Year 2021 Results Presentation
Crown released their Half Year 2021 results to the market. The market seemed to have already priced in these results with the share price moving sideways. The HY21 results are summarized in the table below:
|31 December 2021||31 December 2020|
|Revenue||$581 million||$1.531 billion|
|Net Profit / (Loss) after Tax||$(120.6) million||$218.7 million|
As you can see from the above table there has been a significant change in the comparable period results. Revenues down 62.1%, EBITDA down a massive 99%. The Crown Board also declared that no dividend to be paid for the half, this is upsetting for anyone who previously bought CWN ASX for the dividends.
The results from Crown reflect the severe impact on operations from the COVID-19 pandemic, with international borders still closed and travel still not resumed, one can only assume this will continue for some time. Crown historically has derived a large portion of their revenues from high net wealth international peoples.
Non-Gaming operations have resumed at Crown Sydney in late December, with encouraging property visitation. Gaming has also resumed at Melbourne and Perth Casinos.
Crown Shares Community Sentiment
After surveying 368 Prophet community investors about their current CWN ASX sentiment: BUY-HOLD-SELL as well as their target price over the next 12 months, here are the results:
From the above, the Prophet Community member sentiment is a strong Hold-Sell Rating, with an average price of $10.23 per share.
Crown Shares Technical Analysis
In summary, the downside is likely to prevail as long as Crown rejects the Blackstone proposal. If Crown accepts obviously the share price will trend towards the offer price of $11.85.
Should I Buy CWN ASX: Prophet’s Take
Crown Shares have a resilient business, however, the gambling business model in Australia is currently subject to multiple investigations and even a royal commission. Crown still does not have the license required to open their massive Barangaroo Casino.
It might seem that for shareholders a sale to Blackstone might be a best-case scenario. However with the Board recently appointing a new CEO (Lendlease Groups Steve McCan) potentially the board sees a much higher upside resolving the current issues with blue sky ahead.
Prophet Invest will be staying away from CWN Shares at the current price, the reward is simply not worth the risk in our opinion. We would like to see the current royal commission and acquisition proposal resolved prior to taking another look.
However, with the market being very optimistic already about CWNs future performance, we are staying away for the reason we believe once the world resumes CWN will have some work to do to catch up with their current valuations.
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