ASX code: CWN
Share price: $11.20
Industry: Consumer Services
Consensus forecast FY2017 Dividend: $1.23 
Crown Resorts Group (ASX:CWN) up until recently, has been an internationally focused gaming and entertainment company with businesses spanning casinos, wagering and online gaming products. CWN’s key assets domestically include Crown Melbourne and Crown Perth and internationally Crown Aspinalls in the UK and a 27% stake in Melco Crown Entertainment, which operates casinos in Macau.
As previously reported in Dividend Detective, mid-way through 2016, CWN announced various initiatives aimed at increasing shareholder value likely to occur in two stages:

  • Stage 1 – Demerge certain international investments into a separately listed holding company, consisting of CWN’s interest in Melco Crown, Alon development site in Las Vegas, 20% holding in Japanese restaurant brand Nobu, 50% holding in UK casino group Aspers and their investment in Caesars.

As part of stage 1, CWN will target a dividend payout policy of 100% of the normalised net profit after tax of the remaining businesses.

  • Stage 2 – Float a 49% interest in a property trust owning CWN’s Australian hotels.

More recently however, there was an update (December 2016) to the initiative with the major changes being:

  • Partial sell down in CWN’s interest in Melco Crown generating net proceeds of approximately $1.9bn. The proceeds will be used to reduce CWN’s net debt by ~$800m, fund a special distribution of ~$600m (~$0.82 cps) and enable a share buy-back of ~$500m. The special dividend is likely to be paid in second quarter of calendar 2017 with the buy-back to commence around this time as well.
  • No longer proceed with the Alon project with the most likely outcome in our view being the sale of the project which could generate proceeds of between $250m-$400m.

In our view, the updated initiative is likely to be more advantageous to shareholders on the basis that CWN last reported ~$209m (~$0.70 cps) in available franking credits which could be used to partially frank the special distribution.
Current estimates are for 123cps in FY17, resulting in an ~11.0% dividend yield with ~70cps in available franking credits. In our view, CWN is ideally positioned to capitalise on the growing thematic of inbound tourism, trades below our intrinsic value of ~$14.00 and offers an attractive near term yield.