No ROI from growth plans for three years
Fitch Ratings has released a statement saying that Australia’s predominant gaming companies, Crown Resorts Ltd. and Echo Entertainment, are doing fine despite a weaker overall economy and growth strategies—read expansion plans—that were put in place during the boom years.
According to Asia Gaming Brief, the rival companies’ credit profiles “benefit from operating in well-regulated markets and owning a portfolio of properties which generate strong operating cash flows,” including mass market.
“As Australian casinos are driven by domestic patrons, their growth has been more stable than those in Macau,” wrote the ratings agency. “Their focus on mid-market patrons has resulted in lower receivables outstanding.”
Fitch noted that both companies have big expansions in the works: Crown plans to spend about $1.27 billion on its Melbourne and Perth properties through 2018. Echo “is incurring substantial capex on its Gold Coast property, and has won the Queens Wharf Brisbane bid,” which will also require considerable investment.
The new projects “will not generate revenue for at least the next three years during the construction phase,” wrote Fitch. However, “robust operating cash flows and low-to-moderate leverage should enable Crown and Echo to implement expansion successfully despite the ongoing macro weakening.” It added that financial leverage “may be under pressure, especially for Crown.”
