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Is Crown Oversold After China’s Arrest Of Its Staff?

By Shuli Ren

Crown Resorts (CWN.Australia) slid another 3% to a 10-month low after the Australian gaming company said it plans to float 49% stake in some of its Australian hotels.

“If implemented, the IPO could realise significant value for Crown Resorts shareholders, while providing the ability to maintain a majority interest in key assets within the Australian business,” said the company.

Crown Resorts’ shares have tumbled 17% this week after China detained 18 of its staff, including Jason O’Connor, head of VIP International at Crown. For details, see my blog “China Detains 18 Crown Staff: VIP Gaming In Trouble Again?”

Citi Research thinks this sell-off is overdone. The reasoning is very simple:
Australia’s VIP gaming business represents only 14% of the bank’s 2017 profit estimate. This sell-off essentially implies that Crown’s VIP business is completely wiped out. Analyst Rohan Sundram has the numbers:

We have lowered our CWN FY17-19e EPS by c3% from reductions to our VIP growth assumptions following the detainment of 18 CWN employees by Chinese Authorities.

We view these events as disruptive to CWN’s VIP business over the next 12-18 months, and have lowered our near term VIP growth outlook for CWN, now forecasting an 8%/4% YoY decline in VIP revenue in FY17/18e (from +4% previous). VIP (Melb & Perth) represents c22% and c14% of our FY17e CWN revenue and EBITDA (c70/30 junket/direct split).

Source: Barron's Asia

http://blogs.barrons.com/asiastocks/201 ... its-staff/

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Crown Pushes on With Australian Hotel IPO as China Holds Staff

by Angus Whitley

Crown Resorts Ltd., the Australian casino operator with 18 staff under detention in China, plans to push ahead with a listing of some of its domestic hotels, to raise funds for development projects.

Crown’s board has backed the plan for an initial public offering of 49 percent of an entity holding the Crown Promenade hotels and Crown Metropol hotels in Melbourne and Perth, the company said in a statement Thursday.

The IPO would allow Crown “to maintain a strong balance sheet and credit profile to fund existing development projects,” the Melbourne-based company said. Crown Towers Melbourne isn’t included in the IPO.

The listing was first proposed in June , when Crown also said it would spin off international assets including a stake in Melco Crown Entertainment Ltd. Crown’s current planned investments include a A$2 billion ($1.5 billion) high-roller casino resort at Barangaroo on Sydney’s waterfront.

The Crown staff held in China since last week include three Australians, among them Jason O’Connor, head of international high-roller operations. The trio are being detained for gambling-related crimes, according to China’s foreign ministry.

The company is holding its annual shareholders meeting in Perth Thursday.

Source: Bloomberg

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Oct 18, 2016

How Crown arrests may open buying opportunity in gaming stocks

by Leslie Shaffer

Citigroup also didn't expect the hit to impact Crown Resorts too much. It lowered its earnings per share forecasts for fiscal 2017-2019 by around 3 percent after lowering VIP growth assumptions as the segment would likely be impacted for the next 12-18 months.

Citi lowered its target price on the stock to 15.10 Australian dollars (Exchange: AUD=) ($11.58) from A$15.35, but kept a "Buy" call.

Source: CNBC

http://finance.yahoo.com/news/crown-arr ... 37201.html

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Australia's Crown says no charges laid against staff held in China

PERTH: Australia's top casino operator Crown Resorts said on Thursday no charges had been laid against 18 of its staff held in China for alleged gambling crimes, adding to a sense of confusion that has surrounded the company's biggest crisis.

Ahead of an annual shareholder meeting at the company's casino in Perth, the Crown board endorsed plans to spin off some Australian hotels , to minimise exposure to its underperforming businesses in the Chinese gaming hub of Macau.

But the arrest of the staff, three of whom are Australian nationals including head of international VIP gambling Jason O'Connor, in China last week was the main concern for investors as the company's shares hit a new 10-month low.

"While I know we all have many questions, we must be very cautious and measured in our commentary at this sensitive time in the process," chairman Robert Rankin told the meeting, adding that "no formal charges" had been laid.

When a shareholder complained about the lack of information, Rankin said the situation was "difficult and complex and occurring in another sovereign country, so our ability to comment is limited".

"Now is not the time and place to comment, given the sensitivity of the matter. But there will be a day when we should and will," he said.

Two of the three Australians detained in China had received consular visits and the third would be visited on Thursday, Rankin said.

A Malaysian national was also among the group, he said, but the company has not provided details on the nationalities of the other detainees.

The staff were being held for unspecified "gambling crimes" and investigations were ongoing, China's foreign ministry told Reuters on Monday.

It was too early to determine what impact the arrests would have on Crown's business, Rankin said, amid fears it will hurt the company's ability to attract Chinese VIP gamblers to its Australian casinos, including a A$2 billion (US$1.54 billion) resort under construction on Sydney's harbourside.

Analysts have linked the detentions to Chinese laws banning casinos from advertising or promoting gambling on the Chinese mainland, such as offering credit to high-spending clients.

Melbourne-based Crown holds a 27% stake in Macau-based Melco Crown Entertainment Ltd. It does not directly run casinos in China but relies heavily on Chinese gamblers at its casinos in Perth and Melbourne.

The detentions sent Crown shares tumbling 14% on Monday and the sell-off continued on Thursday. Crown shares fell 2%, while the broader S&P/ASX 200 index was flat.

SPINNING OUT

The plan to spin off some Australian hotels is designed to split the assets from Crown's underperforming businesses in Macau, which has seen VIP gambling revenue shrink amid a Chinese crackdown on corruption.

Crown said the spun-off unit would be listed as a new company on the Australian Securities Exchange and would include hotels in Melbourne and Perth.

Meanwhile, Crown would work on a broader demerger of its international businesses, it added.

It did not give a timetable for the listing or a price guide for the assets.

Fund manager George Clapham, managing partner of Arnhem Investment Management, said the break-up - first mooted in June - would release value for investors.

"Splitting out of the international business and the domestic casinos I think makes sense," said Clapham, whose fund owns shares in Crown.

Source: Reuters

http://www.thestar.com.my/business/busi ... -in-china/

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Crown Says China’s VIP Gamblers Bring in Less Than 12% of Sales

by Angus Whitley & Rebecca Keenan

Crown Resorts Ltd. said high-stakes gamblers from China generate less than 12 percent of total revenue, as the company warned it’s too early to gauge damage from China’s detention of 18 employees.

The contribution to Crown’s total profit from these big-spending, top-priority clients is even smaller, Chief Executive Officer Rowen Craigie told reporters after the company’s annual meeting in Perth on Thursday.

Crown is working with its legal team in China to understand why the staff are being held, Chairman Rob Rankin said at the meeting. No charges have been laid.

Shares of Crown fell further on Thursday, extending their decline since the detentions to 17 percent and taking the company’s market-value loss to A$1.6 billion ($1.2 billion).

The roundup of the staff in China has sparked concern that the government in Beijing may be cracking down on casino companies that promote gambling abroad.

“It’s too speculative to talk about the long-term impact of the detentions,” Craigie told reporters. “We don’t want to talk about any of the details of what is happening in China.”

Crown reported net income of A$948.8 million in the year ended June 2016. Revenue was A$3.62 billion, of which VIP gamblers worldwide accounted for 28 percent, according to Crown’s annual report .


Source: Bloomberg

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Crown is one of Australia’s largest entertainment groups. The group’s core businesses and investments are in the integrated resorts sector.

In Australia, Crown wholly owns and operates two of Australia’s leading integrated resorts, Crown Melbourne Entertainment Complex and Crown Perth Entertainment Complex. Overseas, Crown also fully owns and operates Crown Aspinall's in London.

Crown holds a significant interest in Melco Crown Entertainment Limited (MCE), listed on NASDAQ, operating casino/hotel properties in Macau which include City of Dreams and Altira Macau as well as the Mocha Clubs business.

Crown also has a portfolio of other gaming investments that complement its business.

http://www.crownresorts.com.au/about-us/crown

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Crown, Aristocrat Face Lawsuit Over ‘Deceptive’ Slot Machines

by Jason Scott

Maurice Blackburn to file action in Australia’s Federal Court
Crown says it will ‘vigorously defend’ any action in court

Source: Bloomberg

http://www.bloomberg.com/news/articles/ ... yptr=yahoo

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China detains casino junket agents fleeing to Hong Kong

by Lisa Murray and Angus Grigg

Chinese authorities have detained two junket agents, with strong links to Australian casinos, as they attempted to flee across the Hong Kong border, just days after 18 Crown Resorts staff were taken into custody on the mainland.

The move against the junket organisers last week suggests a broadening of the investigation into Crown and comes after an explicit warning from Chinese officials in Macau just three months ago.

The China Liaison Office, Beijing's representative in the former Portuguese Colony, told a meeting with the Macau Gaming Information Association (MGIA) it was concerned about illegal money flows and that large gamblers were being allowed to bet on credit.

"For more than a year the industry has been warned to pay attention to China's anti-corruption campaign," said Tony Tong, founder of Hong Kong-based risk management firm Pacific Financial Services and vice chairman of MGIA.

The detention of junket agents, who find and bring Chinese high-rollers to casinos and lend them money to gamble, provides the strongest indication yet authorities are not just targeting Crown's marketing activities on the mainland, but also investigating money flows to casinos in Australia.

"The illegal movement of funds has come up repeatedly in discussion with the lawyers," said one family member of the detained Crown staff.

Under China's strict capital controls, individuals can only move $US50,000 out of the country each year.

One industry source said two junket agents, who worked with Australian casinos, had attempted to flee from Shenzhen into Hong Kong soon after news of the Crown arrests broke but were stopped at the border by police.

"These agents had business in Australia," said the source with knowledge of the detentions.

"It is not just the 18 Crown staff who are detained."

The Australian reported that 10 junket organisers connected to Crown had been detained across China and 87 questioned by police.

"The government is sending a clear and loud message to the gaming industry about the prohibition of marketing activities in China," said Mr Tong.

Crown has faced heavy criticism for not heeding repeated warnings that its activities on the mainland were coming under greater scrutiny by Chinese authorities.

Along with warnings about providing credit and facilitating illegal money flows, the casinos were warned about taking government officials, their spouses, children and friends on paid tours or golfing holidays.

"There is an awareness from the government that marketing activities by gaming companies on the mainland have become more subtle," said Mr Tong. "They are not promoted as gambling trips, they are promoted as tourism trips."

The Chinese authorities were reportedly worried that problem gambling was causing "social disharmony" on the mainland and it was becoming a "financial drain" on the country.

China's currency, the yuan, has come under heavy pressure this year as the economy slows, forcing the central bank to run down its foreign reserves to prevent a sharp devaluation.

The 18 crown employees are facing up to 10 years jail for "gambling crimes", although this maximum sentence has not been imposed in recent cases.

Source: Financial Review

http://www.afr.com/business/gambling/ch ... z4OAyxSHNR

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Four Australians are now involved in the Crown Resorts arrests in China

by Phillip Wen

Foreign Affairs Minister Julie Bishop has confirmed the detention of a fourth Australian in China in connection with the nationwide blitz on Crown Resorts’ activities on the Chinese mainland.

The fourth Australian is not a Crown employee but is being held along with the 18 staff detained on “gambling crimes” earlier this month, three of whom are Australian nationals.

“There are now four Australians involved, three are Crown employees and a fourth person we have learnt is not a Crown employee but is detained along with them,” Ms Bishop told the ABC on Sunday.

She said it had taken time to negotiate consular access for some of the Australians detained because they held more than one passport.

“We are also providing consular assistance to them. This has taken some time because some of them are dual citizens – Australian-Chinese – and it has to be determined whether they entered China on their Australian or Chinese passport and whether they will be treated by the Chinese authorities as Chinese or Australian. We have determined all four will be treated as Australian citizens.”

China does not recognise dual nationality, but it is not uncommon for some emigrants to retain their passports and not formally renounce their Chinese citizenship, to avoid having to apply for visas when they return to the mainland for work or family reasons.

It is unclear whether the fourth person is among a number of junket operators – who recommend and arrange trips for Chinese high-rollers to Crown – detained at the same time as the Crown employees.

As revealed by Fairfax Media on Saturday, at least two of the junket agents detained, who operated independently from Crown’s marketing staff, work for Toorak-based Zhou Jiuming, one of Crown Casino’s most lucrative junkets.

A significant number of Crown customers have also been questioned, it is understood.

Communications documenting the movement of millions of dollars are also in the hands of mainland authorities following Chinese police’s seizure of the computers, laptops and mobile phones of those detained.

Ms Bishop said Chinese law allowed for suspects to be detained for a maximum of 37 days without charge. She said her department did not have further information as to what charges those in detention might face.

“It is hard to know,” Ms Bishop said. “We don’t have the details of why they are being held and what potential charges they face. It is clearly to do with gambling, which is illegal in China but there are exceptions when it comes to Macau.

“It may well be part of President Xi Jinping’s anti-corruption campaign involving government officials,” she said.

The detentions come amid a sweeping anti-corruption crackdown in mainland China that has targeted the illicit flow of capital overseas through underground banks and casinos, particularly in the gaming enclave of Macau.

Foreign casino operators have pulled their China-based marketing staff following the Crown detentions.

“I am sure every casino operator around the world is watching this case closely,” Ms Bishop said.

“This will have implications but until such time as we know precisely what they’re facing, it would be counterproductive of me to speculate.”

This article originally appeared on the Sydney Morning Herald’s Business Day. Read the original here, or follow Business Day on Facebook.

Source: BUSINESS DAY

http://www.businessinsider.com.au/four- ... na-2016-10

NOVEMBER 7 2016

Crown's Chinese middleman to VIP high-rollers among those arrested in raids

by Philip Wen


Source: SMH

http://www.smh.com.au/business/crowns-c ... sh1aj.html