Last week, the newly elected government of Sri Lanka announced it was amending tax concessions previously granted to a number of casino and integrated resort projects proposed to be built in Sri Lanka. Crown Resorts Ltd (ASX: CWN) was one of the companies impacted, with plans to construct a US$400 million hotel resort with a casino.
Now, all that is over. When the new president Maithripala Sirisena, who came to power in January, pulled official support, James Packer's company Crown Resorts jettisoned its development plans.
The opposition to the development of the casino was already foreshadowed leading up to the Sri Lankan elections by resistance from Buddhist leaders who feared these gambling resorts would bring with them increased prostitution and damage religious and cultural values.
The Sri Lankan Prime Minister Ranil Wickremesinghe said that the developers could still construct hotels and resorts – but no casinos.
Crown Resort stock didn't react badly to the news. The share price was up 1.18% on Monday when Crown's decision to stop its casino plans was announced. Analysts don't see it as a major blow to Crown since it has a number of other projects with budgets several times larger planned over the next 5 – 6 years.
In Australia, Crown will be developing a 6-star hotel and integrated resort in Sydney estimated to cost $1.5 – $2 billion by 2019. Overseas, the casino operator will be soon opening the movie-themed Studio City resort in Macau and last year purchased a proposed casino site acreage on the Las Vegas strip for a US casino Packer has always wanted.
Investors interested in Crown Resorts may count this scrapped development as a blessing in disguise. Crown will be able to channel funds to use for more urgent projects.
Since mid-January, Crown has rallied about 17% and risen out of its downtrend which started last August. The stock offers a 2.8% yield partially franked and is trading at 16x earnings.
