The Crown Resorts Ltd (ASX: CWN) share price is down around 3% after it was ruled unsuitable to run Crown Sydney.
What happened?
Yesterday, NSW supreme court judge Patricia Bergin SC decided that Crown was unsuitable to have a casino licence, though did offer a path to fixing the situation.
She said that the CEO and Crown board members should leave. This morning it has been announced that Crown directors Guy Jalland and Michael Johnston have resigned.
Another recommendation was that James Packer needs to sell his holding of Crown shares to under 10%. The thought is that Mr Packer shouldn’t be able to have such control over the business.
The NSW regulator, the Independent Liquor and Gaming Authority (ILGA), will make a decision about what to do with Crown.
What can Crown do?
There needs to be a change at the top, as well as Mr Packer no longer holding a large amount of control over the business. It should also improve its enhanced anti money laundering processes.
The states of Victoria and Western Australia will also be looking at Crown with everything that has happened. So Crown will be covering itself by doing the right changes now.
The Guardian quoted the chair of NSW Independent Liquor & Gaming Authority, Philip Crawford after reading a newspaper headline saying that Crown needed to blow itself up to save itself: “That’s probably pretty close to the mark. It needs a lot of change. A lot of concern we have with the links to organised crime. Bergin’s own terminology was that Crown had been infiltrated by organised crime.”
Summary thoughts
Crown has some good assets. Before COVID-19, Crown Melbourne and Crown WA used to generate good profits. If Crown can get through this, do the right things and successfully open Crown Sydney then the shares may prove to be cheap.
But I wouldn’t want to make that bet. A lot is riding on Crown Sydney to open to grow profit into the future and COVID-19 continues to be a significant drag on various elements of the business, including VIP gamers – if they ever come back.
There are plenty of other ASX shares I’d rather buy first. For a COVID-19 recovery I’d rather buy infant formula ASX growth shares like A2 Milk Company Ltd (ASX: A2M) or even Bubs Australia Ltd (ASX: BUB).
Instead of Crown, I suggest getting a free Rask account and accessing our full stock reports. Click this link to join for free and access our analyst reports.
