Yesterday we switched from Star Entertainment (SGR) to Crown Resorts (CWN) as flagged in the morning report, we subsequently received number of interesting / thought provoking comments around the move and I felt today was an opportune time to address some of the issues from our perspective:
1 Some subscribers are disappointed with our new position because gaming has been a “murky business at the best of times”. I would agree with this 100% from a historical perspective but looking forward, regulation around casinos and especially CWN is likely to be better from here, remember how the Banking Sector has evolved over the last few years.
2 Its very important to note that MM have bought into the future outlook for CWN not its messy past where governance failures were clearly common place. We believe that Jamie Packer for example will be a silent shareholder at the most but when he finally manages to offload his stake our view is the stock is likely to rally strongly, the question of how much will be determined by the quality of the buyer (s).
3 At MM we are very conscious of the trend towards ethical investing but like all trends it can and will depress markets too far creating compelling opportunities – at this stage we buy investments which we believe offer solid risk / reward opportunities, it’s up to individual subscribers to see if it suits their particular views.
MM is bullish CWN with an initial +20% upside target.
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