Collected Wisdom

This week: Crown Resorts, Tabcorp, Air New Zealand and nib.

Summary: Analysts have been positive on Crown’s plans to spin out assets and raise dividends - the Intelligent Investor team have a buy on the stock. The NT government’s scrutiny of “click to call” live betting could help Tabcorp by reducing the impact of international competitors, while nib's investor briefing saw profit guidance reaffirmed.

Key take out: Air New Zealand’s sale of its stake in Virgin Group has analysts speculating on a potential special dividend - but AIZ management say the sale will open up more options for growth.

Key beneficiaries: General investors. Category: Shares.

This is an edited summary of the Australian investment press: It includes investment newsletters, major daily newspapers and broker reports. The recommendations offered represent the views published in the other publications and may not represent those of Eureka Report. This article is general advice only which has been prepared without taking into account your objectives, financial situation or needs. Before acting on it you should consider its appropriateness, having regard to your objectives, financial situation and needs.

Crown Resorts Limited (CWN)

The main feature of last week was Crown Resorts’ meaty announcement highlighting plans of a demerger, an increased payout ratio and a potential IPO.

Breaking down the key highlights, CWN plans to unlock what it believes to be overlooked shareholder value by spinning out its international assets, which include the group’s 27.4 per cent stake in the US listed Melco Crown Entertainment (Macau operations), 20 per cent stake in global Japanese restaurant brand Nobu and the Las Vegas and UK operations.

Further to this the group will raise the dividend for CWN from 65 per cent to 100 per cent of its net profit after tax. And finally the board will look to potentially spin out the Australian properties via an IPO of a listed property trust.

The move has been welcomed by analysts and market commentators, unlocking value and giving greater transparency to the individual divisions and giving shareholders greater options to tailor their investment strategy. Clearly the market agreed with the share price jumping 13 per cent the day of the announcement.

The team at Intelligent Investor have CWN as a buy, which is in line with market consensus. The average 12 month price target currently sits at $13.73 with the share price at $12.75 at the time of writing.

Investors are generally advised to buy Crown Resorts Limited at current levels.

Tabcorp Holdings Limited (TAH)

Keeping in the wagering theme, Tabcorp had analysts tapping away on keyboards but not in relation to any announcements from the company. The Northern Territory government issued a notice to wagering companies based in the top end to cease the “click to call” live betting options.

The “click to call” functionality provided by the majority of international wagering companies via smartphone apps (think Sportsbet and Samuel L Jackson with Bet365), allow users to place bets on live sporting events without the need to speak to an operator.

Tabcorp does not have this functionality but the majority of its competitors do and this has been a disadvantage to Tabcorp as this functionality has been gaining market share in sports wagering for the international players.

Analysts see the move by the NT government as a positive outcome for Tabcorp as it will help significantly slow the momentum of the international bookmakers. The move has those negatively impacted bookmakers accusing the government of favouring the local players.

The consensus remains a hold for TAH and this is in line with our colleagues at Intelligent Investor. The current average 12 month price target is $4.60.

Investors are generally advised to hold Tabcorp Holdings Limited at current levels.  

Air New Zealand (AIZ)

Last week Air New Zealand, the maker of possibly the best pre-flight safety demonstration videos (click here for an example) announced the sale of its majority stake in Virgin Australia Holdings Limited (VAH) to the privately owned Chinese conglomerate, Nashan Group.

The transaction of the 19.98 per cent stake in VAH for 33 cents per share, subject to regulatory approval, will bring in $267m for Air New Zealand. Analysts are speculating this will open the door for a potential special dividend. This is speculation. The official word from Air New Zealand management is the sale will enable the company to focus on its own growth opportunities while maintaining its relationship with Virgin.

The sale to the Nashan Group is viewed positively by commentators due to its ownership of emerging airline Qingdao, which operates out of China’s Qingdao Liuting International Airport.

The consensus has Air New Zealand as a hold with an average 12 month price target of $2.45. At the time of writing the share price was $2.03.    

Investors are generally advised to hold Air New Zealand at current levels.

nib holdings limited (NHF)

nib provided the tea and coffee for analysts and shareholders last week as it hosted its annual investor day briefing. Management of the health insurer reaffirmed the profit guidance issued in April of $125m - $135m.

The key takeout on the day from management was the claim that inflation was starting to normalise. All analysts commented they expect to see the favourable trend start to fade with the normalisation but despite this are anticipating nib to hit the upper end of its guidance figures come August.

Although the consensus is favourable heading into the next reporting season, analysts remain wary due to government private health insurer reviews. This, along with the above mentioned normalisation in claims, is enough to have the consensus pointing to a hold for the insurer.

The average 12 month price target sits at $4.42 with the share price sitting at $4.18 at the time of writing.

Investors are generally advised to hold nib holdings limited at current levels.

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