Price the key for Burswood takeover

STOCKBROKING analysts have released widely divergent valuations of casino and resort operator Burswood following last week’s $686 million takeover offer from Kerry Packer’s Publishing and Broadcasting Limited.

Patersons Securities’ Robert Gee said he believed Burswood’s independent directors would reject the takeover, pitched at $1.40 per share.

He suggested a takeover valuation of $1.83 a share.

In contrast, DJ Carmichael analyst Steve Piotrowski recommended shareholders accepted the offer, which is well above his valuation of $1.10 per share.

Sitting in the middle is Euroz Securities’ Justin Stewart, who said the reality was that PBL was the only likely bidder and best placed to extract synergies.

He rates Burswood a “hold” at current prices, pending a formal response from its independent directors.

PBL’s takeover offer has been widely expected since the State Government removed ownership restrictions on Burswood.

PBL acquired a 14.2 per cent stake in Burswood last September, blocking any other potential bidders.

Should its offer succeed, PBL is expected to try and boost Burswood’s performance by applying some of the practices it has adopted at Melbourne’s Crown Casino.

PBL said its offer should be accepted because it was at a 29 per cent premium to the average price of Burswood shares in the past 12 months. It also said the price represented an “attractive multiple” of earnings relative to other casino transactions in Australia.

Mr Gee takes a different view, saying “the offer price falls at the low end of the price range that gaming assets have exchanged hands in recent years”. He has a positive view on Burswood’s future earnings, forecasting a net profit of $43.8 million this year compared with the market consensus of around $38 million.

In addition, Mr Gee said the offer did not take account of the likely benefits from Burswood’s property joint venture with Mirvac Fini, nor does it take account of the benefits of new gaming machines and the new hotel under construction.

One surprise in the offer was PBL’s intention to suspend dividend payments until Burswood’s debt is extinguished.

As such, the PBL offer also ignores the $45 million of surplus franking credits available to Burswood.

Mr Piotrowski has a lukewarm view on Burswood, despite its good results in the latest half-year.

“Turnover from overseas visitors continued to decline and we believe growth prospects in the medium to long-term are modest,” he said.

Burswood’s board has advised shareholders to take no action until it has evaluated the offer.

Should PBL acquire Burswood, it would be the third major WA listed company to be taken over in the past year, following BankWest and Bristile.