1H14 Results

Crown Resorts reported a 29.4% jump in 1H14 underlying profit to $315 million. Reported net profit pre-significant items totalled $382.5 million, up 64.3%.

Despite the strong growth, CWN's earnings fell short of analyst estimates, helping to explain the drop in its share price on the day of the announcement.

In particular Australian resorts disappointed expectations, with normalised EBITDA and revenue down 4.4% and 6.1% respectively.

At Crown Melbourne, a 33.1% drop in VIP revenue was blamed on a burdensome tax regime in Victoria, which essentially limits the amount of money CWN can spend attracting high rollers to its venue.

A positive outcome for CWN, which succeeds in lowering Crown Melbourne's VIP tax burden, is likely to drive a turnaround in Australian VIP revenue.

Melco

Melco Crown Entertainment (MCE) continues to be the main driver of CWN. CWN's equity accounted share of MCE's normalised net profit surged 118% in 1H14.

Melco's growth was driven by both the VIP and mass market segments. Asia's rising wealth translated to strong growth in the premium mass customer segment at Macau's premier entertainment hub, City of Dreams.

In response to Melco's strong profit growth, the board of the Macau JV recently approved a special dividend, of which $71 million is due to hit CWN's bank account.

Going forward, the Melco board will implement a quarterly dividend policy, with the payout ratio equating to 30% of annual profit.

This cash injection is likely to bolster CWN's already strong balance sheet, providing scope for the group to expand dividends to its own shareholders.

Share to Buy: Crown Limited (CWN) is a post from: Australian Stock Report Share Tips

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