Govt.’s latest move signals green-light for gaming operations at JKH’s Cinnamon Life

In a move to formalise and regularise the country’s casino industry, the government has published new rules to issue casino licenses upto 20-years along with a regulatory framework, which is expected to officially allow John Keells Holdings’ (JKH) flagship Cinnamon Life to move ahead with its plans to operate a casino within the premises.

President Ranil Wickremesinghe on August 31 signed the relevant gazette notifications issuing regulations to regulate the casino industry (Casino Business Regulation No.01 of 2022) after obtaining the approval of Cabinet of Ministers.With effect September 1, 2022, new applicants and the existing four operators are required to obtain licenses based on new rules under the Betting and Gaming Levy of 2010, subject to a fee of Rs.500 million for a 5-year period, which is an increase from earlier Rs.200 million. 

The operators may apply for longer periods in multiples of five years up to 20 years with fees paid up front. In addition, operators are required to pay 10 percent of their gross collections monthly.

The new development is expected to allow JKH to operate a casino within the premises of Cinnamon Life by allowing the leasing of its 150,000 sq. ft space to an existing license holder, according to Capital Alliance.

“… JKH will now commence discussions to enter into a tripartite agreement with a license holder and an international operator in order to set up casino operations at the property within the next 12-15 months, with the fit-on capex to be incurred by the operators,” Capital Alliance said in a research note.

The gaming facility of Cinnamon Life is expected to commence operations in first half of 2024.
Similarly, Asia Securities stressed that the full economic potential of the Cinnamon Life project would only be unlocked through the proposed operation of a gaming facility at its resort. 

The brokerage projected gross gaming revenue (GGR) at Cinnamon Life to grow at a healthy 54.1 percent CAGR over the FY24-28E period and by crossing US$ 500 million mark in FY29.

However, revenue recognition to JKH from casino operations is expected to be primarily through its rental income. Accordingly, CAL estimates casino operation to provide US$ 7.1 million additional income to JKH’s topline while contributing 6-8 percent on EBIT in its first full year of operations (FY25).

Meanwhile, under the new regulations, the casino operators would have to ensure that “soliciting for the purpose of prostitution” is not committed by its employees, patrons and others within the premises. Further, drunken or disorderly behaviour is also banned within the premises.

Further, casino operators are required to appoint fit and proper compliance officers who would be responsible, so that the casinos operate in compliance with the rules and laws of the country. In case of an enquiry, these officers are also required to cooperate with the government.

Moreover, casino operators are also required to prepare financial accounts within six months after a financial year and to submit audited financial statements to the subject minister within that period.

Sri Lanka’s existing casino space is limited to 90,000 sq. ft spread over four different locations: Bally’s 
Casino, Casino Marina, Bellagio and Star Dust are estimated to be attracting 30,000-40,000 patrons a month. (NF)