Crown Resorts has been a high conviction buy expressed on the blog. The share price made a low at $11.69 and is now trading at $12.80.
Following Melco Resorts (NASDAQ listed) buying 50% of James Packer’s holding in Crown at $13 per share, we see scope for increased VIP flow from Melco’s large high roller customer base.
Whilst there is scope for Melco to make a full takeover of Crown, it is not our base assumption. We suggest investors hold Crown for the 4.5% yield and for those seeking greater cash flow, selling an out of the money covered call option will boost the annualised cash flow to 10% plus.