AUSTRALIA

Crown Sydney takes shape as trade war clouds Australia prospects

Crown Resort’s $2.2 billion ($1.56 billion) ultra-VIP property is on track to open in the first half of 2021, though the recent slowdown in the China economy has again highlighted the dependence of Australia’s integrated resorts on Asian VIPs.

Shares in both Crown and its key rival Star Entertainment were battered over the final half of last year as the impact of the U.S./China trade war began to take its toll on China’s economy.

Crown’s stock fell more than 21 percent from its August 52-week high of A$14.59 to a low in November of $11.43, while Star’s share price fell 33.5 percent over the same period.

The concern is that as China’s economy slows, so will the spending power of its VIP gamers.

Although Australians are the biggest gamblers per capita in the world, the spending is still centered on bars and clubs and figures for main floor casino gaming remain lacklustre.

Crown’s 2018 results showed revenue clearly driven by VIPs. Main floor gaming revenue gained just 1.5 percent while VIP program play turnover surged 54.4 percent. The figures are for the fiscal year ending in June, before the latest China slowdown.

In a November update, the company said main floor gaming revenue for July to Oct. was down 0.6 percent, while growth in VIP program play had slowed to 13 percent.

The six-star resort, which is taking shape on the harbour front at Barangaroo, is counting on continued growth in the Asian VIP sector and that Sydney will be the main entry point for those growing tourism numbers.

China arrivals to Australia during the last fiscal year ending June rose 13 percent to 1,421,500, with visitors spending $11.3 billion. That outstripped New Zealand as the biggest source market with 1,371,300 in terms of arrivals and dwarfs spending by Kiwis, which added up to just $2.6 billion.

However arrivals from China up to end October, the most recent monthly data, showed a gain of 6.4 percent, with that figure declining further to just 0.9 percent for the month of October alone, suggesting a marked slowdown.

The Crown Sydney will be the city’s first six-star resort and is expected to be tables only. As of a November update, the tower elevator core structure had been constructed to Level 17. The company says it’s on time and on budget.

It will be competing for clientele with Star Entertainment’s existing resort in the city. Although analysts expect the new property to have clear appeal to the high-end market, Star has built strong Asia credentials through its partnership with Hong Kong’s Chow Tai Fook Group and the Far East Consortium, which is likely to help it connect with Chinese VIP players.

With growth in Australia’s domestic casino gaming market expected to remain flat, both companies will be counting on expanding the international market to avoid cannibalization.

In the 2016/2017 fiscal year, total gambling expenditure was down 0.5 percent, with casino games down 7.8 percent, according to the bi-annual figures collated by the Queensland government. The statistics reflect the period after Crown employees were detained in China, which heralded the prior slump in VIP traffic. The real growth sector in Australia appears to be sports betting, which saw a jump of 15.3 percent during the period.

Crown in December won a court case over the views from its Barangaroo project, which were expected to be a key selling point, looking out over the harbour and the opera house.

Donaco explores strategic options

Australia-listed Donaco International said it’s conducting a strategic review of its businesses, including a potential restructuring of an almost $40 million debt to Mega Bank.

The company said the review was triggered in part by a plunge in its share price, which it says is in no way reflective of the value of its assets. The company operates the Star Vegas casino in Cambodia and the Aristo International property in northern Vietnam. Donaco said it was looking at ways to restructure, or eliminate the Mega Bank debt to help free up cash flow for management initiatives.

The debt is secured on Star Vegas and not on Aristo. The company says it’s in discussions with several parties, who have suggested options to unlock value.

The strategic review is expected to take about three months, it said.

Blue Whale eyes Casino Canberra

Casino Canberra is on the verge of being bought up by one of Australia’s biggest hotel owners in a potential A$32 million (US$22.6 million) transaction set for completion in 19Q2.

In a filing to the Australian Stock Exchange, Aquis Entertainment, the current owners of Casino Canberra, announced it has entered into a binding Implementation Deed with Blue Whale Entertainment, a company owned and controlled by Michael Gu. Mr. Gu is also the chief executive of iProsperity, a private equity firm representing Asian high net worth investors, which has built a reputation for high-profile hotel acquisitions.

The transaction will see Blue Whale’s acquisition of the outstanding convertible loan and 137 million company shares held by Aquis Entertainment Canberra Holdings.