Echo Shares Rise as Sydney Casino Revenue Climbs: Sydney Mover
Echo Entertainment Group Ltd. (EGP) rose to the highest level in a month in Sydney trading after the Australian casino operator reported growing revenue, offsetting concerns that a slowing economy may crimp consumer spending.
The shares gained 1.1 percent to A$2.75 at the close in Sydney, their highest closing level since July 18. Strong growth in revenue from high-rolling gamblers boosted sales 6.8 percent in the first seven weeks of the current fiscal year, “driving solid profitability growth,” the Brisbane-based company said in a regulatory statement today.
The increase suggested bets from offshore high rollers will cushion weak domestic spending which reduced gaming tax revenue in the three months ended March. Echo today reported net income of A$84 million ($75 million) for the year ended June, lagging the A$123 million average of five analyst estimates compiled by Bloomberg.
The company will see “continued growth across the domestic business into the coming year” as a result of an expected improvement in consumer sentiment following a Sept. 7 election and the reintroduction of a loyalty program at Sydney’s Star casino, Lachlan Fitt, an analyst at Macquarie Group Ltd. in Sydney, wrote in a note to clients today.
Echo, vying with billionaire James Packer for revenue from Asian gamblers, is also benefiting from a cost-cutting program, Fitt said. The cuts reduced operating spending by about A$40 million during the year, compared with a A$30 million savings forecast from February. The company said it will save more than A$60 million next year.
Echo’s shares slumped 14 percent in July, when Packer’s Crown Ltd. (CWN) moved a step closer to winning approval for a rival casino on a stretch of Sydney’s harbor shore adjacent to the Star complex. Packer’s 350-room hotel tower would target only VIP gamblers and wouldn’t be allowed to operate slot machines, according to Crown’s planning application to the New South Wales state government.
“Things are not deteriorating,” Echo’s Chief Executive Officer John Redmond said in a conference call with investors after the results. Redmond said he’s “very excited” about the future of the company’s VIP business.
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