Deutsche Bank has initiated coverage of gaming stock, Crown Limited (ASX: CWN), with a Hold recommendation.

Research analyst, Mark Wilson initiated coverage with an A$14.52 twelve month price target.

Crown Limited, spun out of PBL, will comprise PBL’s gaming assets including the wholly owned Australian businesses (Crown Melbourne and Burswood) and investments in Macau, the UK, the US and Canada, including Melco PBL Entertainment (38%), Aspinalls (50%), Fontainbleu (19.6%), Crown Las Vegas (37.5%), Gateway Casinos (50%) and Betfair Australia (50%).

Mr Wilson said “The purpose of the demerger is to enhance the focus and strategies of the gaming business and better align the capital structure and financial policies with industry peers.”

“Key upside and downside risks include: changes to household disposable income, regulatory and gaming tax rate changes, increased competition in key markets, the performance of investments associated with project risks and Melco PBL share price volatility.”

Mr Wilson noted that with an undergeared balance sheet, the stock is trading at 30.7 times pro forma FY08E earnings and 16.3 times EBITDA (13.6 times adjusted for investments). This represents a significant premium to domestic peers (65% or 37% adj) and a 2% premium to international comparables.

“On a pro forma basis, we expect normalized EPS to decline by 2% in FY08 but to increase by an average of 20% pa in FY09 and FY10 given compound annual earnings growth of 7% for the domestic gaming businesses, declining losses/increased earnings from MPEL, and an increasing contribution from the company’s 50% investment in Gateway Casinos, effective 16 November 2007.”

For further information, please call:
Monika Lancucki +61 2 8258 2792 or Kate Abrahams +61 2 8258 2416