Crown Jumps +20% | Tourism Holding’s Aussie Deal

10 April 2019

 

Global markets were lower overnight as shares on Wall Street snapped an 8-day winning streak as tariff tensions between the United States and its European trading partners went from simmer to boil and the IMF cut its global growth outlook. 

Two of our tourism stock exposures were in the news yesterday – Crown Resorts and Tourism holdings, which we discuss below.  One of our key investment themes is that a tourism boom will be a multi-year tailwind for tourism stocks given the continued trend of affordability in travel (particularly relative to income) and as a growing Asian middle class chooses Australia & NZ as a travel destination.
 

Stock in Focus: Crown Resorts (CWN:ASX)

Crown Resorts shares closed +20% higher at $14.05 yesterday after confirming a report by Street Talk that Las Vegas giant Wynn Resorts had made a takeover offer for the local casino company at an implied value of $14.75 per share. The proposal involved 50% cash and 50% in shares and values Crown at $10 billion.

However, overnight, US based Wynn said that "Following the premature disclosure of preliminary discussions, Wynn Resorts has terminated all discussions with Crown Resorts concerning any transaction". It's reasonable to expect Crown shares to fall sharply this morning.

Competitors Star Entertainment and SkyCity also rose on the news as they are alternative takeover targets to Crown.

We currently have a BUY recommendation on Crown.

Members should look out for a full update on Crown to be released in our weekly report.

 
Australia & New Zealand Market Movers

The Australian share market was virtually flat yesterday (ASX 200 index +0.01%) with US casino operator Wynn Resorts' $10 billion takeover offer for Crown Resorts providing most of the day's excitement. The price of oil continued to rise (to a 5-month high) given the fallout from supply constraints in Libya, Venezuela and Iran, which continued to support locally listed energy stocks such as Woodside Petroleum.

 

The New Zealand market slipped again on Tuesday (NZX 50 index -0.29%) for a 5th session in a row as losses across retirement stocks such as Summerset and Metlifecare continued to weigh on the broader market return. Tourism Holdings posted the biggest gain for the day, up nearly +5% as the rental RV operator's joint venture with Thor Industries (TH2) announced the merger of its CamperMate and RoadTrippers businesses with Australia's GoSeeAustralia and Outdoria to create a single trans-Tasman entity.

 

3 Things Markets Will be Watching this Week

  1. This week marks the start of the US first-quarter reporting season.
  2. The European central bank makes an interest rate decision Wednesday night (AU/NZ time).
  3. The Reserve Bank of Australia’s semi-annual Financial Stability Review is released on Friday.

 

Have a Great Day,
 

Team

Two of our tourism stock exposures were in the news yesterday – Crown Resorts and Tourism holdings, which we discuss below.

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