Crown bets on a lucky roll of Asian dice - Monday 28th of November 2005

It was a tough week for James Packer. He had the courts dredge up his worst business experience so far at the One.Tel hearings in Sydney: the details of his breaking into tears in Lachlan Murdochs kitchen were reported with relish by most newsrooms.

But some investors were not looking at what happened four years ago. They were looking four years ahead, when it is likely Packers PBL will have become a much bigger gambling concern.

PBLs gambling interests got a boost on Friday when the Tasmanian Parliament did its best to accommodate the PBL master plan, passing the first phase of legislation that will allow the company to launch online gaming in Australia.

Online gaming is one leg of PBLs strategy - and if people enjoy sitting in front of a computer losing money, thats up to them - but the strongest potential for further gambling growth is the companys ambitious plan to exploit old-fashioned roll-the-dice casino gambling, especially in Asia.

Over the past year, PBL has digested the acquisition of Burswood Casino in Perth, which is now coupled with its very profitable Crown Casino in Melbourne.

The next phase is to take the Crown brand to Asia, specifically to Macau, where PBL has joined the Ho family (another billionaire clan) to create Crown Macau. PBL has committed to spending $211 million on developing its gambling interests in Macau, which is 35 kilometres from Hong Kong.

Anyone who has witnessed the newly enriched Chinese gamble will understand the potential scale of this boom industry. On the Macau-Hong Kong ferry (also owned by the Ho family), Ive watched scores of Hong Kong punters returning home on a Monday morning after gambling all night in Macaus casinos.

Greg Fraser, a senior analyst at Shaw Stockbroking, has managed to capture the phenomenon in hard numbers. He points out that the average gaming table in Las Vegas takes $US2200 ($A2990) a day but in Macau the tables take an average $US27,000 a day.

Indeed, Macau is expected to pass Las Vegas in terms of gaming revenue in the near future.

The PBL business is difficult to analyse as it is a diversified group with profits flowing from two types of TV (free-to-air and pay TV through Foxtel), print media and gambling. In addition, the Packers rarely say anything to shed real light on what is going on there.

It is clear that the Nine Network is struggling - its been beaten in the ratings by a resurgent Channel Seven, and staff at Nine are enduring a second round of job cuts within a year.

The magazine division at PBL remains a good earner. But it is gambling income - already representing 45 per cent of group operating profits - that looks the most exciting part of the business.

Apart from Asian opportunities - and these may take the best part of two years to get off the ground - online gaming, represented by its Betfair venture once the Tasmanian Parliament completes the paperwork, has much potential.

Controversially, Tasmania seems to be the only state willing to host online gaming.

But PBLs stock has been doing very little despite this potential - its been an average performer. Maybe the Packers should talk about the business a little more often.

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