Crown (CWN) Update

Submitted by Jim Thesiger on 22 May, 2008 - 14:33

Crown (CWN) has a price target of $15.00 by Australian stockmarket analyst Macquarie Research Equities.

Crown (CWN) Macau preliminary commission rate cap guidance of 1.25% of rolling chip

Preliminary commission rate cap guidance of 1.25% of rolling chip

Local TV news (TDM) reported that Macau government has issued a preliminary guidance of VIP junket commission rate cap at 1.25% of rolling chip – a level generally agreed by the six operators according to Francis Tam, Secretariat for Economy and Finance. The government may legislate this rate cap if this guidance proves to be ineffective. There was no mention of regulating credit/ liquidity provision by casinos to junkets, and regulation of table capacity has yet to be determined.

Uncertainty to the implementation and effectiveness of this rate cap

There are still question marks as to 1) how this rate cap gets translated into revenue sharing and 2) whether RFB is included in the calculation of this rate cap. Effectiveness of this rate cap is still uncertain as it is only guidance by nature.

1.25% cap translates into 42-46% revenue share on a 2.7-3.0% hold

At a hold of 2.7-3.0%, a 1.25% commission cap would be equal to 42-46% revenue share. At the moment we are not sure if the 1.25% cap includes room, food and beverage (RF&B) expenses of 0.1% of rolling chip. Adding this could bring the cap to 1.35% or 45-50% revenue share on a 2.7-3.0% hold.