Non-gaming revenue jumped 10% over the July to October period as hospitality rents and hotel revenues continued to drive underlying profits for CWN. The fact that the Barangaroo development and the newly announced deal in Sri Lanka will solely concentrate on VIP rollers, coupled with high end hotels and hospitality, should see this figure continue to rise over the medium term and is long term positives for the stock.
VIP gaming rose 1.4% on the corresponding period and was ahead of expectations, however breakdowns were not given; making it difficult to pin point where the expansion was seen. The trading suggests Macau and Perth but that is not definitive.
However, main floor trading revenue was completely unchanged on the corresponding period. The Melbourne and Perth trading floors are believed to be suffering from weak consumer sentiment.
That comment is supported by comments from the RBA over the last month. The board still sees consumer sentiment below trend, even with 2.25% in cut over the last 24 months. Low consumer sentiment means less disposable capital to partake in activities such as gaming, and the numbers out CWN are threfore not surprising.
The stagnant growth in main floor gaming reiterates the company’s strategic shift to VIP and non-gaming revenue. I see the long term strategy providing stronger revenues and more stable income streams, and the hand over between the old and the new will start to filter through results over FY14 and FY15.
There is nothing new here to really change the fundament view of the company. Trading in the stock hasn’t changed on these results either. Initial reactions saw CWN breaking the bottom upward channel line before snapping back and pushing into the green.
The results suggest to me that the upward trend in CWN is holding and could see CWN testing the $17.20 high in the short term.
I would suggest buying dips around $16.15-$16.20, putting a stop-loss in at $16 with limit at $17.50. If the AUD falls it will help international trade and increase VIP gaming from international players, and if there is an additional rate cut then main floor gaming could support earnings further; all of which are net positive.