In the good books
1. CROWN RESORTS (CWN) was upgraded to Outperform from Neutral by Macquarie
Macquarie has examined the strategic rationale for the Crown Resorts-Melco Resorts bid and has given it the thumbs up, pointing to the resulting revenue synergies and stronger penetration into the Asian premium market. The broker believes the deal could offer 17% upside to the Crown share price, on a valuation basis. However, the broker notes that the near-term fundamentals are underwhelming as the US/China trade war continues to hurt VIP trade and the domestic environment faces its own hurdles. The broker cuts earnings-per-share estimates -2% out to FY21 to recognise the removal of the share buy-back. Price target rises to $12.60 to reflect a 50:50 spread across fundamentals ($11.20 a share) vs Melco Resorts takeover at $14 a share. Given the potential for a higher bid, the broker upgrades to Outperform from Neutral.