Australian casino operator Crown Resorts is attempting to downplay the impact of potentially having to curtail its lucrative Chinese VIP gambling business.
Crown held its annual general meeting on Thursday, during which it sought to reassure investors that last week’s detention of 18 Crown staffers, including its head of international VIP business Jason O’Connor, wasn’t a death blow to the company’s future earnings potential.
According to Crown, one-third of its revenues come from overseas visitors to its Australian resorts, while international VIP gaming programs account for “around a quarter” of FY16 revenue (actually 28%). Of this international VIP revenue, “approximately 12%” comes from visitors from mainland China.
Crown goes on to say that margins in its international VIP gaming program are “substantially lower” than Crown’s other businesses, meaning the share of profits derived from mainland Chinese VIPs is “substantially less than 12%.”
Crown chairman Robert Rankin (pictured, insisting all is well) also claims that the in-development $2b Crown Sydney project was still viable despite the VIP uncertainty. The controversial project was approved only after guaranteeing that it would focus on an international VIP clientele, meaning it agreed not to house any of the video poker machines that have caused problems with Australia’s rank-and-file gamblers.
Crown’s reassurances failed to stop the slide in its share price, which fell again on Thursday, making a total decline of 17% since the detentions became public knowledge, erasing around AUD 1.6b (US $1.2b) from Crown’s market cap.
While the Crown staffers are reportedly being held on suspicion of gambling-related crimes, they have yet to be charged. Reports emerged yesterday that China’s investigation of their activities could take up to a year before formal charges are filed.
China is undoubtedly making full use of that time to pore over the phones, laptops and USB drives seized when the staffers were arrested. The devices contain detailed info on Crown’s mainland VIP clients, information that local authorities will be only too happy to use in their ongoing crackdown on corruption among state officials and other high-profile individuals suspected of contravening China’s capital controls.