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Crown’s Melco stake sale not a call on Macau, analysts say

Crown Resorts’ decision to halve its stake in its Melco Crown Entertainment venture is not a call on the Macau market, but rather a decision to refocus on Australia, analysts say.

On Wednesday, Crown said it was cutting its 27.4 percent holding in Melco by selling 13.4 percent to partner Melco International. The Australian company also said it was dropping its planned Alon Las Vegas resort project, which would have been its first in the U.S.

“Crown had become a passive shareholder in recent years and stepped back from executive roles - so we don't see any change in day-to-day management,” Wells Fargo senior analyst Cameron McKnight said in a note. “This is part of Crown's announced strategy to reduce its international investments, so we don't see it as a long term call on Macau.”

Wells Fargo adds that the sell down should increase Melco’s free float of shares and increase liquidity. “While MPEL isn't an illiquid stock, greater free float market cap could open its stock up to additional investors,” it said.

Bernstein Research agreed, saying the transaction is positive for Melco as it shows “strong commitment from Chairman Lawrence Ho.”

“Crown’s sales should not be taken negatively as the read through should not be that CWN is bailing on Macau. Instead, the sell-down is related to Crown’s own internal restructuring and change in strategy,” it said.

However, Bernstein adds that longer term it would be better for Melco to redomicile its listing from Nasdaq back to Hong Kong.

Asia Gaming Brief is a news and intelligence service providing up to date market information for worldwide executives on relevant gaming issues in Asia.

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