Consumer

David Fickling is a Bloomberg Gadfly columnist covering commodities, as well as industrial and consumer companies. He has been a reporter for Bloomberg News, Dow Jones, the Wall Street Journal, the Financial Times and the Guardian.

Followers of Crown Resorts Ltd. and its controlling shareholder James Packer must be growing sick of reading about splits.

We're not talking about the end of Packer's tabloid-baiting romance with Mariah Carey. The company's planned spinoff of its international business has threatened to dismember two sets of assets that, in the words of Carey's biggest hit, belong together.

Shareholders who sold the stock Tuesday on reports in the Australian Financial Review that the corporate divorce has been put on hold should think twice: The abandonment of the deal could be a blessing in disguise.

Double or Quits
While Crown Resorts has suffered since reports of a Chinese crackdown, Melco Crown has prospered
Source: Bloomberg

Crown shares have fallen about 10 percent since 18 employees were detained by Chinese authorities in relation to its marketing of high-rolling VIP gambling tours. But -- as Gadfly argued at the time -- the crackdown on foreign rivals was mostly good news for Macau's home team. Melco Crown Entertainment Ltd., the casino that was to form the core of the new spun-off business, is up 24 percent over the same period.

Crown's planned demerger was always a lopsided deal. The proposed international business comprises a 27.4 percent stake in a world-class casino company thanks to its Melco holding, plus a grab-bag of nearly worthless scraps and a stake in a proposed Las Vegas development that could turn into either a money-spinner or a cash-pit.

The domestic business retains a couple of gems in the form of its casinos in Melbourne and Perth, but the attractions of those assets -- not to mention a planned Sydney gambling resort catering solely to high-rollers -- have been sorely dented by the Chinese crackdown.

Big Brother
Crown Resorts' share of Melco Crown's free cash flow is forecast to comfortably exceed its own over the coming three years
Source: Analyst estimates, Bloomberg

Even were that not the case, substantial planned capital spending on building that Sydney site means that analysts expect Crown's notional share of Melco Crown's free cash flow over the coming three fiscal years to comfortably outstrip its own.

Backing a Winner
Melco Crown's blended forward 12-month price-earnings ratio is running way ahead of Crown Resorts'
Source: Bloomberg

The negatives that shareholders will assume if Crown holds onto its uglier international assets -- those casinos in the English towns of Milton Keynes and Northampton, a stake in Nobu, the suburban Las Vegas Cannery casino -- are comfortably outweighed by the benefits of holding onto its stake in Melco. 

Rare jewels -- whether a stake in a Macanese casino or the diamond engagement ring that Carey reportedly received from Packer -- don't come along every day. Crown Resorts shareholders should take a lesson from Mimi: If you've got your hands on something precious, hold onto it with both hands.

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

To contact the author of this story:
David Fickling in Sydney at dfickling@bloomberg.net

To contact the editor responsible for this story:
Matthew Brooker at mbrooker1@bloomberg.net