MARKETS SPECTATOR: Laying down the cards

Tourism is likely to be the trumpcard in Echo Entertainment and Crown's submissions for Sydney's second casino licence.

Submissions are due today for a licence to run a second Sydney casino.

Echo and Crown are expected to make their proposals to the New South Wales government. Michael Goltsman, the Citigroup analyst who follows casino operators, says both companies' gambling development proposals are likely to be worth around $1 billion. They will attempt to convince the government they can attract more tourists to Darling Harbour through their developments, something the NSW government desperately wants.  

Crown is believed to have proposed a $1 billion hotel and casino at Barangaroo that will cater to the very wealthy, particularly from Asia. Echo may propose to spend as much as Crown on an extension of its existing The Star casino near Darling Harbour.

“Which proposal is most likely to succeed?” asks Goltsman rhetorically. “The answer lies in the project that best acts as a tourist drawcard and compliments the large-scale developments at Darling Harbour and Barangaroo over the next decade.”

At present, gambling trends in Sydney and Melbourne are "not great”, he says. Crown’s Perth casino may suffer if the effects of the mining downturn results in less gambling.

Goltsman has a 'buy' recommendation on Crown shares because of its 33.7 per cent stake in the Macau casino operator Melco Crown, a popular destination for Chinese tourists and other Asian people who are restricted from gambling in their home markets. His 12-month stock price target for Crown is $13.80. At 1245 AEST Crown shares were down 18 cents, or 1.5 per cent, to $12.12.  

Echo’s shares fell 4 cents, or 1.3 per cent, to $3.03. Goltsman does not recommend investors buy Echo. But he has a 12-month share price target for the stock of $3.30.

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