NagaCorp Halts Russian Casino Project in Vladivostok
Cambodian casino group has been planning a huge casino resort in Russia’s far east at Vladivostok, and this has since been halted as part of sanctions. The resort has been made with huge ambition and budget, targeting a market that was ripe for a fresh participant, but alas the actions of the Russian state have caused corporations all around the world to halt their commercial agreements. NagaCorp mentioned various uncertainties in their statement announcing that things would be slowing down in the region.
The city of Vladivostok had been the target ground of a new business venture for the casino corporation NagaCorp. The Cambodian outfit has now halted the project in light of the uncertainties that have emerged throughout Russia during the Ukraine conflict. ©Evgen2907/Pixabay
NagaCorp did not explicitly mention the war in Ukraine, or the influx of economic sanctions placed on Russia by the international community as their reason for halting the project. In a filing to the Hong Kong stock exchange made on Wednesday night, the organisation stated that they needed to trigger a force majeure clause on their investment deal, stating that the project would be halted indefinitely whilst the situation in the region remains unclear.
The Ukraine conflict is hardly the only thing affecting this decision, as numerous difficulties in the longevity of the project have become clearer in recent weeks. Local restrictions from target markets including Japan, China and South Korea have not given financial planners the confidence that the resort in Vladivostok will even be able to attract clients from these regions. Furthermore, the COVID-19 pandemic is still very much limiting the freedom of travel and assembly in large parts of Asia.
But the biggest problem facing the Vladivostok casino project has been the ban of junket operators in China. Hundreds of people have been arrested in the country for channelling money across the borders, thus helping wealthy mainlanders gamble. Alvin Chau and his Suncity Group crackdown have been the most public example of how far China’s authorities are willing to go when it comes to eradicating the ability of its citizens to gamble abroad.
NagaCorp Using the Ukraine War as an Escape Route in Vladivostok
Given the strong headwind facing this project, the war in Ukraine serves as a convenient mechanism for NagaCorp to withdraw from the project and cut its losses. They made a large commitment on the project and what may have seemed like a strong business venture opportunity just 5 years ago, is clearly no longer working and will need a quick resolution. Even since the beginning the project found it difficult to get going, displaying a tendency for constant stop and start. This latest development will now likely lead to a long period of stasis whilst project managers try to determine the best path to proceed on.
NagaCorp have been smart since the deals were signed on this project in 2013, the original pledge to spend upwards of $350 million has been tightly controlled, and the gradual unlocking of funds have enabled them to limit the exposure. Launch dates for the public opening have been perpetually delayed, despite a confident and strongly worded assertation in its 2022 company report that made clear the project was on track to complete in 2022.
Up until now it is assumed that around $84 million has been spent on the project, and in an update to shareholders last month on the progress of the construction, NagaCorp stated that it was fully confident the project will deliver on its revenue and earnings growth forecasts in the long run. These confident statements made to external parties appear to be at odds with the internal sentiment and feeling towards the success potential of the project now that NagaCorp have taken the first off-ramping opportunity presented to them.
In light of the new wait-and-see approach being deployed on this project, there will now likely be a consolidation period which will involve a greater focus on its assets elsewhere. Having already ploughed billions into its NagaWorld resort complex, and opening a shopping mall, the financial posture of the corporation is unlikely to be significantly affected by the latest setbacks in Russia. The core market Cambodia is making great progress in its effort to become the gambling centre of South East Asia.
