What's new?

The headline grabber for Crown recently was the new deal with the Victorian Government to increase its number of gaming tables and expand the size of the casino floor in return for progressively higher taxes on its pokies. But Crown has been busy on a number of other fronts as well.

After freshening up its balance sheet in December last year with $300million of new equity and refinancing $1.6 billion of existing bank debt, the gaming company renegotiated its Cannery Casino acquisition in the US and delivered its interim result for 2009.

Amid the financial gymnastics, Crown has been overseeing an array of construction activity, including the refurbishment of gaming floors in Melbourne and Perth, the topping out of the latest hotel addition in Melbourne and the eye-popping construction works at the City of Dreams in Macau.

Since the demerger from Publishing and Broadcasting in November 2007, Crown has embarked on a three-pronged strategy that hasn't quite played out how they originally saw it.

The Australian casinos have been the rock upon which earnings and cash flow have been solidly built and continue to do so. The joint venture in Macau is gradually being pieced together with the opening of the mass-market City of Dreams this week the latest instalment. Crown in effect owns a casino licence in Macau and already has the high-roller Crown Macau in operation there.

It is the third leg of the strategy that has hoisted Crown's petard. The portfolio of global gaming investments seemed to be a shotgun approach to landing stakes in various ventures in Las Vegas, Miami, Pennsylvania, Canada and Britain. The interim result contained $547.5million in write-downs relating to investments in associates.

The outlook

Global gambling businesses are not the flavour of the month but Crown may yet turn out to be one of the biggest survivors.

Macau was always going to be a long-term prospect. With two major casinos in play and big competitors falling by the way, Crown is nicely poised to benefit from the 1 billion people who live within a three-hour flight of Macau. In Australia, Crown Melbourne and the Burswood Casino in Perth continue to generate exemplary earnings growth, even in difficult economic conditions. Crown has not baulked at spending money to keep these casinos in prime condition.

Price

At about $7 recently, Crown's share price is about 36 per cent below this time a year ago - a slightly worse performance than the S&P/ASX 200 index. But it is now almost 67 per cent ahead of its 12-month low of $4.18 and 16 per cent ahead of the beginning of the year.

Worth buying? Summing up the three parts of Crown is probably the best way to approach valuing the stock. Applying the current market value to the Nasdaq-listed Macau joint venture (MPEL) and harshly assigning no value whatsoever to the portfolio investments would imply the Australian casino businesses are being valued at about six times their forecast operating earnings for the 2009 financial year.

By historic standards, and various casino transactions over the years, this is a low multiple. Gamblers might say this is worth a punt but investors might just prefer to see a few more cards before going "all in".