April 12, 2019 / 4:46 AM / 4 months ago

Breakingviews - Australia’s Crown could be Plan B for Japan losers

FILE PHOTO: The logo of Australian casino giant Crown Resorts Ltd adorns the hotel and casino complex in Melbourne, Australia, June 13, 2017. REUTERS/Jason Reed/File Photo

HONG KONG (Reuters Breakingviews) - Crown Resorts could become a handy Plan B. James Packer’s $6.4 billion Australian casino empire is effectively up for sale after Wynn Resorts broke off talks this week when details of its offer spilled into the open. The would-be target’s shares are trading higher than they were before bid news surfaced. Any operators that fail to win a licence in Japan may yet train their sights Down Under.

A destination like Osaka or Nagoya will be the next jackpot. There are just three projects up for grabs, and competition is fierce. Las Vegas Sands and MGM Resorts have said they could invest as much as $10 billion in the country. Their deep pockets and long track records set the bar high.

Betting on Australia would be less demanding, and offers readier rewards. Crown is an established outfit that would cost less than matching the pledge from Sheldon Adelson’s Sands and starting from scratch in Japan. The Sydney-based operation generated around $230 million in net profit last year, and trades at a robust 22 times expected earnings. A swanky new property is in the pipeline, too. Australia is also sparing with its licences, meaning there is limited competition.

Despite more gambling options becoming available across the Asia Pacific region, Australians enjoy a flutter and wealthy Chinese visitors have fuelled growth at Crown. Galaxy Entertainment, for one, would be able to capitalise on the trend with its fat address book of mainland high rollers. Malaysia’s Genting could complement a Chinese clientele with a roster of Southeast Asian customers. Its earlier investment in Star Entertainment, a rival Australian outfit, suggests the idea has at least crossed management’s mind.

Another potential suitor might be Lawrence Ho’s Melco. It was Crown’s former partner in Macau. Though Ho is determined to bring his slick brand to Japan, and tends to prefer developing markets, his familiarity with Packer’s group might give him an edge.

None of the three will want to give up on Japan too soon. There also will be other distractions, as Harrah’s owner Caesars Entertainment may soon be up for sale as well. Even so, Crown could yet be a valuable consolation prize.

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