The move by casino operator Crown Resorts Ltd, to halt until June next year any activity with external gaming-junket partners, was unlikely to lead to a long-lasting cut in such ties, said JP Morgan Securities Australia Ltd, in a Tuesday note.
“We do not believe anything beyond a temporary suspension will eventuate,” stated analysts Don Carducci and Abhinay Jeggannagari.
VIP play “accounted for approximately 7 percent of Crown Resorts’ normalised earnings before interest, taxation, depreciation and amortisation over the last five years,” noted the JP Morgan team.
Historically, many of Crown Resorts’ VIP players have been from Asia. Australia’s borders are currently closed to most international travellers, due to Covid-19.
Crown Resorts’ current flagship venue is Crown Melbourne (pictured in a file photo) in Melbourne, Victoria. It also operates Crown Perth in Perth, Western Australia, and aims to open a third property, at Barangaroo, in Sydney, New South Wales, this December, if the local regulator permits it.
JP Morgan was making reference to a Friday filing by Crown Resorts to the Australian Securities Exchange, that the firm was to halt all work with junkets until the end of June next year, and to undertake a comprehensive review of processes related to junket operators and create a head of compliance and financial crimes.
The announcement followed examination during a public inquiry ordered by the New South Wales Independent Liquor and Gaming Authority (ILGA), into the suitability of Crown Resorts as a casino licensee for Barangaroo.
The ongoing inquiry has heard of concerns that Crown Resorts was not sufficiently distant from people linked to the VIP gaming industry that allegedly moved in the same circles as persons in Chinese organised crime.
JP Morgan noted that – under a recently-publicised but six-years-old agreement between former New South Wales premier Mike Baird and Crown Resorts, the latter could be entitled to monetary compensation if the state regulator made changes to the terms of its Sydney licence.
But Mr Carducci and Mr Jeggannagari noted: “Under the deed, Crown is not entitled to compensation if ILGA terminates its casino licence outright on ‘disciplinary’ grounds,” i.e., “if Crown is unsuitable or that it, or a company representative, breached the [state’s] casino act or its casino licence”.
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”“The Royal Commission finds Crown is unsuitable to hold a casino licence [in Melbourne] on the basis that it has engaged in conduct that is ‘illegal, dishonest, unethical and exploitative'”
Report from the Royal Commission into the Casino Operator and Licence
State of Victoria, Australia