Clime Asset Management

Crown’s reputation in China has been tarnished following the detainment of 18 employees including the Executive VP of VIP International. The share price reaction to this news was brutal, falling around 15% over the last week. Sometimes this reaction is warranted, but sometimes, it is not. We feel Crown’s current predicament falls into the latter and therefore represents an opportunity for value investors. Roughly one-third of Crown’s revenues are generated from International VIP, of which less than half is from visitors from Mainland China. It seems around 12% of earnings are at risk. However, upon closer analysis, we have concluded that the junket channel, which makes up ~60-70% of this segment’s revenues, is not at risk and that only the direct marketing channel, comprising the remaining 30-40%, is at risk. On this basis, current concerns relate to ~2-4% of profits. Read our analysis of this opportunity here: (VIEW LINK)


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