Packer hedges his bets on Japan casino

James Packer has played down the prospects of Crown Resorts pushing for a casino licence in Japan.

Crown Towers in Melbourne.

James Packer has played down the prospects of Crown Resorts pushing for a casino licence in Japan, and warned there is risk the company is overcapitalising on its flagship $2.4 billion Crown Sydney casino project after spending too much on its Perth and Melbourne properties.

In an interview with The Australian, ahead of Crown’s AGM this Thursday, Mr Packer said he did not want its management “distracted” by writing a big cheque to participate in a competitive bidding process to build a casino resort in Japan.

Crown has been looking at investing in a casino licence if it becomes available in the Japanese city of Yokohama, which the company believes has similarities to the Melbourne market.

“There isn’t a great opportunity to get back into Vegas. And there isn’t an opportunity to get back into Macau. I don’t want our management to be distracted,’’ Mr Packer said, in reference to Crown’s decision last year to sell its stake in Asian gaming group Melco Crown Entertainment and scrap its plans for the Alon project in Las Vegas. The Alon land on the Vegas strip is now for sale.

business graph: Crown Resorts share price

“People talk to me about Japan. I don’t believe it is realistic for us to win a licence in Japan.’’

Asked if that meant a Crown casino resort in Japan was off the table, Mr Packer replied: “It is off my table. But I am only one director and I haven’t had the conversation with the board.’’

He then added: “I am not saying ‘no’ forever, but what I am saying ‘no’ to is writing a $500 million or $1bn cheque to go into Japan next week.”

Casinos were illegal in Japan until the Japanese parliament passed a controversial “Integrated Resort Promotion Law” in December last year to legalise casino resort developments.

But the international casino industry is still waiting to see a formal casino bill setting out the main principles under which the nation’s casino industry would be run. The decision to call a snap election next month is likely to delay this until the middle of next year.

Mr Packer’s former business partner, Melco Resorts chairman and CEO Lawrence Ho, earlier this month reiterated his company’s commitment to entering Japan. Other big American casino groups are also keen.

By contrast Crown is preparing for a ramp-up in capital expenditure for its expansion into Sydney, worth $2.4bn on a gross basis but more likely to be worth $1.6bn net of apartment sales, according to analysts.

Mr Packer said he was wary of making the same mistake in Sydney that he made in Melbourne and Perth, where Crown has spent more than $3bn over the past decade.

“One of the mistakes which has been under-reported is that we spent too much capex in Melbourne ($1.8bn over 10 years) and Perth ($1.5bn), making those facilities better. We overcapitalised them. We didn’t get the returns from the growth capex ($2.3bn) we spent,” Mr Packer said.

“There is a risk we are overcapitalising Sydney. I don’t believe that is correct and I believe in the business model. And if the base case is achieved, it will be a good deal for shareholders.”

He also stressed Crown Sydney would not have been approved by the NSW government “if Melbourne is not as it is and Perth was not going to be what it has become”.

“Some people are very good at talking the talk about things like being a good employer. We actually walk the walk. We have won employer of the year award three times running,” he said.

“One of the reasons I will be very happy if I end up with 50.1 per cent of Crown (he currently owns 48.5 per cent after selling shares over the past year to fund the settlement with his sister Gretel) and we have Crown Perth, Melbourne and Sydney, is that I am incredibly proud of the facilities. Each of the facilities are changing their cities. We make cities better.”

Investors have questioned whether Crown can really stand still for the next few years and just focus on Crown Sydney and a new five-star hotel development in Melbourne, given its penchant in recent years for corporate transactions.

They include failed attempts at a privatisation and a demerger.

Mr Packer said the phrase “standing still” understated the significance of Crown Sydney.

“It will be the most important building built in Australia for a long time. A $2.4bn project. I wouldn’t say that just because we are looking to run Perth and Melbourne better, and to build Sydney, that the company is on care and maintenance,” he said.

Mr Packer is also passionate about growing Crown’s key digital ­assets: online wagering group CrownBet, online betting exchange Betfair and more recently, online social gaming business DGN Games.