Echo Hits Record After Beating Packer’s Crown to Brisbane CasinoDavid Fickling
Echo Entertainment Group Ltd. shares rose to a record after fending off competition from billionaire James Packer’s Crown Resorts Ltd. to develop a new casino resort in Brisbane.
The stock gained 3.5 percent to A$5.01 at 11:25 a.m. in Sydney, its highest level since a June 2011 initial public offering and capping a 32 percent gain this year.
The selection of the Destination Brisbane consortium, which also includes Chow Tai Fook Enterprises Ltd. and Far East Consortium International Ltd., will protect Echo’s existing Brisbane business that amounts to 19 percent of earnings, according to Deutsche Bank AG.
The project is a wager that rising spending in Australia’s casinos can absorb as many as three new major resorts over the next five years, as an anti-graft crackdown in China drives Macau gamblers elsewhere in the region.
The Brisbane resort “will be an asset for this state that will compete with anything in Macau, Singapore or other destinations around the world,” Echo Chief Executive Officer Matt Bekier said in a regulatory statement Tuesday.
The resort centers around a C-shaped hotel, with a roof garden overlooking the Brisbane River, glass-floored observation deck, and a footbridge across the river, according to masterplans on its website.
The state’s former Treasury building, which currently houses an Echo-owned casino, will be converted into a Ritz Carlton Hotel Co. site and a department store.
More details of the resort, including development cost and final designs, must be worked out in the final stage of the planning process.
Mark Wilson, a Deutsche Bank analyst in Sydney, estimated in a July 20 note to clients that the development will cost A$1.5 billion ($1.1 billion). Echo said Tuesday it expects to fund the project through existing and new debt facilities and cash flow generated by the business.
Chow Tai Fook and Far East will each have a 25 percent stake in the consortium, with Echo holding the remaining 50 percent. All three will provide capital to develop the resort, with their contributions matching their stakes.
Residential and related developments will be paid for by Chow Tai Fook and Far East on a 50-50 basis, Echo said.
Echo will receive a fee for operating the integrated resort and its partners will also receive fees for any VIP business which they directly refer to the casino, according to the statement.
The decision seals a turnaround in Echo’s battle with Australia’s biggest casino company, Crown. That company broke Echo’s Sydney casino monopoly two years ago after winning the rights to develop a new casino targeting high rollers on the shores of Sydney Harbour opposite Echo’s Star site.
Crown had submitted a rival Brisbane development plan with property developer Greenland Investment Pty.
Echo’s net income in the year ended June 30 will have almost doubled from a year earlier, hitting A$201 million according to the average of eight analyst estimates compiled by Bloomberg.
Returns on the Echo’s stock amounted to about 42 percent over the 12 months ended June 30, compared to a 17 percent decline for Crown, the first time Echo has outperformed its larger rival since the 2012 fiscal year.
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