Fitch Ratings says the credit profiles of Australia’s two largest listed casinos – Crown Resorts Limited and Echo Entertainment – continue to be stable against the backdrop of a weakening macroeconomy and sizable expansion plans.
Fitch said in a press release that Crown’s and Echo’s credit profiles benefit from operating in well-regulated markets and owning a portfolio of properties which generate strong operating cash flows.
“As Australian casinos are driven by domestic patrons, their growth has been more stable than those in Macao. Their focus on mid-market patrons has resulted in lower receivables outstanding.”
However, both casinos have sizable capital expenditure pipelines, says Fitch.
“Crown’s planned capex (excluding licence payments) on the Melbourne and Perth properties is about USD1.27bn for FY15-FY18. Echo is incurring substantial capex on its Gold Coast property, and has won the Queens Wharf Brisbane bid.”
“The new projects will not generate revenue for at least the next three years during the construction phase. Robust operating cash flows and low-to-moderate leverage should enable Crown and Echo to implement expansion successfully despite the ongoing macro weakening. Financial leverage, however, may be under pressure, especially for Crown.”