What happened to Echo Entertainment Ltd Shares?
Shares in casino operator Echo Entertainment Ltd [ASX:EGP] surged by nearly 8% today, leaving the flat broader market in its dust. Although the company endured a tough end to 2013 and the stock has been volatile this year, today’s move sees EGP approximately flat compared to this time last year, and up more than 20% including dividends in the year to date.
Why did this happen to EGP shares?
This morning, Echo provided a trading update. The company expects to outperform most analysts’ forecasts and achieve a net profit after tax of between $150 and $153 million in the year ending 30 June 2014.
A deliberate focus on costs has supported Echo’s earnings growth. But more pleasingly for investors, the operator of The Star in Sydney and The Treasury in Brisbane said that revenue is continuing to grow as strongly in this quarter as it did in the last.
The full-year result will be subject to win-rate volatility and the level of debtor provisions, but those concerns look to be back-of-mind for investors, who have marked the shares up strongly today.
What now for Echo Entertainment Ltd?
Shareholders should cheer this news. The company is clearly executing its business plan well in the face of some intense competition in the Australian casino market from Crown Resorts Ltd [ASX:CWN]…albeit competition that’s tightly regulated.
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Tim Dohrmann+
Small-Cap Analyst, Australian Small-Cap Investigator
