![The outlook for James Packer's Crown Resorts' domestic business is softening.](/content/dam/images/g/s/3/l/m/s/image.related.afrArticleLead.620x350.gtpenu.png/1484168248770.jpg)
James Packer's return to the Crown Resorts board looms as a challenging time for him and incoming executive chairman John Alexander with the outlook for domestic casinos softening, according to analysts.
In a sign that 2017 could be a tough one for Mr Packer and his casino and entertainment giant, CLSA analyst Sacha Krien has forecast a large fall in Australian gaming income in 2017 due a big drop in VIP revenue and a slowing in mass market revenue growth.
In a CLSA report on the Asian casino industry, Mr Krien said the Australian casino sector faces an "uncertain year" following the arrest of Crown employees in China last year and forecast a 6.7 per cent fall in gross gaming revenue in local casinos.
He said the arrests had created "significant uncertainty around the outlook for VIP revenues in financial year 2017 after a period of strong growth driven by regional market share gains" and that mass market income growth would be flat.
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Mr Packer on Tuesday laid out a series of priorities to mark his return as a Crown director, led by dealing with the ongoing situation in China where 18 Crown staff were arrested, but after which his focus will be heavily on Crown's Australian operations.
Among Mr Packer's priorities was "being shareholder focused in the way we do business" and a shake-up in Crown's shareholder base could loom.
Theo Maas, partner at Crown shareholder Arnhem Investment Management, told The Australian Financial Review that Crown's decision to sell down its stake in Macau-focused Melco Crown last year and abandoning its Las Vegas interests would trigger a substantial change in Crown's share register.
"Where the stock used to have appeal for growth investors driven by associate income from the potential growth of the Macau market, the recent changes will put the stock more in the yield category as the company will be paying out an above-market fully franked yield with the potential of further special dividends and share buyback programs."
Crown owns casinos in Melbourne and Perth and is building a new $2 billion casino and hotel complex at Barangaroo in Sydney.
Mr Krien has an "underperform" rating on Crown and has an expectation of less than 10 per cent total return on the stock over the next 12 months, though he said he expected the company's performance to bounce back in 2018 and 2019.
This year, the CLSA analyst has forecast earnings per share growth of 2 per cent from flat revenue. His 12-month price target for Crown is $11.50. The company's share price closed at $11.62 on Wednesday, up 4ยข. Deutsche Bank analyst Mark Wilson has a $14.57 price target and a "buy" rating in comparison.
Crown provided a less-than-rosy update on its trading performance at its annual meeting in Perth in October, revealing that from July 1 to October 16 revenue from the main gaming floor (excluding VIP program play revenue) rose 1 per cent on the previous corresponding period."We expect run-rate improvement in [the second half of the 2017 financial year] following the opening of a new six-star hotel and associated facilities in Perth in December," Mr Krien said. "However, near term we do not expect much better than 2-3 per cent [annual] mass revenue growth, given a weak Western Australian economy and limited expansion capex for Melbourne."