Crown's licence to make money is under threat

Crown has a licence to make a lot of money but it needs to remain within regulatory boundaries regardless of its desires to squeeze the last drop from the profit lemon.

As far as the practice of blanking, this is probably a bridge too far. For the player he or she needs to bet bigger or smaller - and may not have the option of betting the preferred level.

It was an issue that was raised by Federal MP Andrew Wilkie last year having been alerted to the practice by whistleblowers. Regulators had little choice but to pursue the very public issue.

Wilkie tabled evidence from former gaming-floor technicians at Crown's casino in Melbourne's Southbank, claiming they had been ordered to make secret alterations to boost losses on poker machines.

The decision made by the Victorian Commission for Gambling and Liquor Regulation is to begin disciplinary proceedings against Crown - the result of which could result in cancellation, suspension or variation of the casino license, a fine or a letter of censure.

It says it was already investigating the issue before Wilkie raised it in Parliament.

For its part Crown says that trialling blanking machines didn’t require the approval of the regulator - so there is nothing to answer.

But the parties disagree.

Investors didn’t seem to fazed by the announcement from the regulator - seemingly taking the view that the sanctions would be at the lighter end of the spectrum.

The stock fell 1.87 per cent on Monday against the broader market which was off 0.7 per cent.

Meanwhile Crown alerted the market that James Packer could be selling some shares.

It will see his holding maintained at just over 47 per cent as the company is also undertaking a share buyback.

Packer did not explain why he wished to retain his shareholder at the current levels however his selling will be closely monitored given the recent controversy sparked by the share sales of Domino’s boss Don Meij at the same time the company was undertaking a buyback.

Australian Steel industry

Any hopes that Donald Trump would carve out Australia from his protectionist America First policy to apply tariffs on steel and aluminium are rapidly evaporating, as his officials hit the US talk shows over the weekend insisting there would be no carve outs or special deals for close allies.

Putting aside for the moment the global trade distortions that tariffs can induce on the economics of free trade, in the short term at least, the ramifications for Australia’s steel producers are not dire.

Our biggest steel company, Bluescope Steel, is likely to be a net beneficiary of Trump’s desire to save jobs in the US steel making industry thanks mainly to the fact that it has steel manufacturing operations in the US.

And that steel will be pre-priced up thanks to the fact that imported will be more expensive. A note from broker Credit Suisse suggest there is a $300 million profit gain on the back of this by 2019 for Bluescope .

On the other side of the ledger Bluescope also exports product to the US from its Port Kembla operations to supply its US metallic coating and painting operations which would be hit by a 25 per cent tariff.

But a note of caution. If US steel customers can’t afford to pay higher prices (relative to those outside the US) the Trump protectionist policy may ultimately kill off some of their local manufacturers that buy steel.

For Australia the downside is that displashed steel makers around the globe (particularly in Asia) that export to the US will be looking to sell cheap product to other markets - like Australia.