Home Units As Well As Casinos

Sydney Morning Herald

Wednesday June 20, 2007

Edited by Vanda Carson xchange@smh.com.au

First you set them up in a swanky apartment and then you take all their money at the tables.

JAMES PACKER'S Nasdaq-listed Melco PBL Entertainment is looking to make a good profit on the 650 Macau apartments it plans to build to help finance the construction of the casino.

Over the weekend it said it would now build two blocks of serviced apartments on the Cotai Strip (Macau's version of Las Vegas) rather than just one.

ABN Amro gaming analyst Fraser McLeish has calculated the joint venture partners could pocket a profit equivalent to $885 million on the apartments, which are expected to cost $353 million to build and fit out.

The apartments on the City of Dreams site are expected to be sold in 2010.

They are clearly inferior to apartments selling at rival casino the Venetian, because Melco PBL is selling for $US850 ($1000) per square foot, versus $US1350 at the Venetian.

Shares in PBL bounced back yesterday after falling 12 per cent so far this month. They rose 14c to close at $19.29. Melco PBL are down a total of 37 per cent since listing.

Woodies on the move

M&A speculation has certainly pumped a lot of heat into Woodside Petroleum's share price over the last week.

Following a UK analyst's report last week which noted a Woodside-BG tie-up could be a smart move, industry publication LNG Intelligence yesterday reported Shell could be taking another look at Woodside.

Shell, which owns 34 per cent of the Australian company, famously failed to win Federal Government approval for its 2001 tilt at Woodside.

After years of sitting back and taking non-operating roles in Australian projects, Shell is starting to rebuild its local exploration and development capabilities, and is increasingly promoting its Australian upstream business.

But it isn't clear whether Shell's ambitions extend to a Woodside takeover or whether it thinks its chance of success is any higher this time around.

LNG Intelligence noted the Anglo-Dutch company may not make an offer before the federal election later this year, given the political sensitivity of the issue, meaning any potential deal could be months away.

Woodside shares closed 90c higher at $46.85, the highest since May 2006.

Big numbers

Investors' new, new love affair with resource stocks is pushing the tryst to dizzy heights.

Once regarded as highly cyclical businesses with boom-bust revenue profiles, the market continues to shrug off distant memories of a resources bust.

So is a resource investment still a canny idea? An analysis of the 26 metal and mining industry companies on the ASX 200 gives a yes-and-no answer.

On a trailing 12-month earnings analysis, Bloomberg shows the 26 resource companies at a nosebleed price/earnings ratio of 26.

Remember, in previous years, a P/E of 20 or more was generally reserved for go-go growth stocks such as Woolworths or CSL. Resources were marked down to much lower levels.

But - do not adjust your sets - the forecast earnings for the current year give a forward P/E ratio for the same metals and mining companies of a much more reasonable 17.

This is not cheap but not necessarily break-your-bank expensive and reflects a big step up in forecast earnings based on volume growth and price increases.

The big exception, of course, is the "not applicable" when it comes to P/E ratios in resources: companies such as Fortescue Metals Group that do not yet have earnings on which to base this kind of calculation.

Interestingly, the picture for the broader ASX 200 on average P/E ratios is sobering, with an (unweighted) average of 23 based on trailing 12-month earnings. And the forward P/E ratio jumps to an even more expensive 27, reflecting an expected cooling in growth of corporate profits.

Wilson on rocket

You know we are close to the top when brokers start listing.

Wilson HTM yesterday made an over-the-top debut, with shares in the Brisbane brokerage closing up $1.41 on the $2 issue price.

It raised $25 million from the issue.

Bell Potter and Austock must be salivating at the thought of listing.

Rival broker Findlay Securities plans to take advantage of the buoyant sentiment, raising $7 million for a listing on July 5.

Founder and executive chairman Ivor Findlay stands to make as much as $5.5 million.

Futuris likes ISP

Futuris, the rural agency and whatnot group, appears to have no immediate plans to exit the telecom sector. It has increased its stake in telecom tiddler Amcom from almost 47 per cent to more than 49 per cent.

Amcom is a Perth CBD internet service provider and telecom which has 19 per cent in second tier telecom iiNet.

Telecom NZ was earlier this year believed to have been in talks with Amcom.