Question: I am rather concerned about the fall in Crown’s share price and have had difficulty finding out the reason. Are there problems with Macau? Would be glad of advice on whether or not to sell out.
Answer (By Paul Rickard): There are clearly some issues with Macau, which is impacting Crown. Crown owns approximately 33.8% of Melco Crown Entertainment, one of the casino operators in Macau.
The Financial Times reported that total gaming revenue in Macau declined by 2.6% in 2014 (the first year-on-year decline), with steeper declines at the back end of the year. An expectation of a further revenue decline is one of the factors currently impacting Crown.
Despite the issues in Macau, the brokers remain largely positive on Crown based on the strength of its domestic business and prospects. According to FN Arena, broker sentiment is currently +0.6 (scale -1.0 most negative, +1.0 most positive), with a consensus target price of $16.44.
Given the fall in price, my inclination is to hang on to Crown at these levels.
Question 2: In relation to your recent article “Super at every stage – 55 plus”, you mentioned transferring personally held assets into super CGT free.
What are the annual limits for such contributions and can property be transferred? If property is allowed, I imagine that a portion could be transferred by a percentage of ownership (say 20%) deducted from a current property valuation.
Answer 2 (By Tony Negline): If by property you mean residential real estate, then in most cases the answer is no because super funds aren’t allowed to acquire this type of real estate from members or their relatives.
The concessional and non-concessional contribution caps are important for moving assets into your super fund prior to retirement.
All of this can get tricky so I encourage you to take some advice.
Question 3: Could you explain “short selling” to me?
Answer 3 (By Paul Rickard): “Short selling” is the opposite of buying.
If you buy a stock, hopefully at some stage you can sell it at a higher price to make a profit. With short selling, you sell the stock first with the intention of buying it back at a lower price to make a profit.
As you can’t sell something that you don’t own, a short seller needs to be able to borrow the stock from another party. Typically, a short seller borrows the stock from a financial institution and secures the loan of the stock with cash.
The stock is then sold into the market, with the short seller receiving cash, and delivering the borrowed stock to the buyer. When it comes time to close the short position, the transaction is reversed. The short seller buys the stock back in the market, and then delivers that stock to the institution that he borrowed it from.
Important: This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. Consider the appropriateness of the information in regards to your circumstances.
