The market took a bit of a set against James Packer’s gambling group Crown today after it reported a “normalised” net profit of $370.1 million for the 2007-08 year. The shares dropped more than 3% or 36 cents to a low of $7.87, before they recovered a touch to trade around $7.99 just before 11 am.

Crown’s shares lost 30% so far this year, underperforming the 21% fall in the overall market. It added a further 3% to that under performance this morning.

Crown said its Crown Macau completed its first full year of operations and traded successfully. Crown holds its interest via a 37.9% stake in MPEL (Melco Crown Entertainment Ltd) which reported a net loss for the 12 months ended 30 June 2008 of US$44.2 million.

This includes a US$57.2 million non cash amortisation charge for the gaming sub-concession acquired in 2006 and also includes pre-opening costs at City of Dreams of US$10.5 million.

After adjusting for a difference in the amortisation charge for the gaming sub-concession and conversion to Australian dollars, Crown’s share of MPEL’s net loss for the 12 months ended 30 June 2008 was $5.3 million (normalised $8.4 million).

Reported adjusted EBITDA for MPEL’s first casino, Crown Macau, was US$110.6 million with trading in the second half generating a pleasing US$117.6 million of reported adjusted EBITDA.

The Macau market continues to show exceptional growth with revenue up 49.2% for the twelve months to 30 June 2008 (VIP up 56.6% and Mass Gaming up 39.2%) and with visitation up 20.9% to 29.3 million visitors. The Chief Executive of the Macau SAR announced in April 2008 that the number of licensed casino operators would remain the same “for the foreseeable future,” Crown said in its ASX statement.

There was no mention at all of the move by China only last month to restrict Chinese from travelling to Macau and a story overnight Wednesday which came obviously too late to be considered for the statement. But that story caught the eye of investors and analysts in the US and Australia. And that’s probably why Crown was weaker than it should have been today.

Quoting unnamed sources, Portuguese news agency Lusa reported yesterday that the Chinese government may tighten individual visas to Macau to one visit every six months from the current limit of one every two months.

In July, China limited Macau visas under its individual visit scheme to once every two months. In addition, starting in September, mainland residents will no longer be able to enter Macau on a Hong Kong visa.

So what happened to listed gambling stocks in the US with Macau exposure? Down went Las Vegas Sands Corp (11%), Wynn resorts (off 4.3%), MGM, down 9.4% and Melco, off 11% to $US6.48, compared to a 52 week high of $US19.09. It was up 10 cents in after hours trading.

Peter Fray

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