PHNOM PENH -- Cambodian casino operator NagaCorp has suspended development of its first overseas project, a casino resort near Vladivostok, Russia, citing "various uncertainties."
The company did not directly mention Russia's invasion of Ukraine or the resulting sanctions many governments have announced on financial and business dealings with Russia in its filing with the Hong Kong Stock Exchange on Thursday night.
But it invoked a force majeure clause in its investment agreement with Russian authorities, saying, "The company would like to suspend the development of the project indefinitely until the circumstance is clearer."
The sanctions are hardly the only crosswinds facing the project, which was intended to take advantage of a location close by Russia's border with China and a short flight away from South Korea and Japan. Casino gambling is banned in Japan and mainland China, and largely restricted to foreigners in South Korea.
COVID travel controls and flight suspensions have already made conditions difficult for the two casinos, Shambala and Tigre de Cristal, that are open in the zone where NagaCorp was building its project.
On top of that, Chinese police in October rounded up 142 people they said had been breaking laws by channeling gamblers to Tigre de Cristal.
Soon after, Alvin Chau, then chairman of Tigre-owner Summit Ascent Holdings, was arrested in Macao and charged with involvement in illegal gambling, leading a criminal group and money laundering, though local police have not publicly linked the case to the Russian casino.
Consequently, some analysts suspect NagaCorp may be using the Ukraine war as a convenient escape route from the Vladivostok project.
"Whatever was good about it five years ago is no longer good," said Tim Shepherd, who has been investing in gaming projects in Cambodia and neighboring countries as director of Fortuna Investments Worldwide in Hong Kong.
"Vladivostok is a headache for them, and this has now given them the option to get out of the large commitment they had made to the project."
Added Ben Lee, head of consultancy IgamiX in Macao and a former NagaCorp executive: "The project has a very checkered history of stop-and-start, and I think we will see yet another period of prolonged stasis."
NagaCorp has taken a gradual approach since signing the investment agreement for the project in 2013 with a pledge to spend $350 million on the development.
Targeted opening dates have come and gone, though the company said in its last annual report that the project "remains broadly on track to commence operations by 2022." A contractor building the project last year said that about $84 million had been spent on the project up to that point.
In updating shareholders on construction progress in its annual results last month, NagaCorp said, "The group believes that the investment project in Vladivostok will drive revenue and earnings growth in the long term."
Daiwa Capital Markets analyst Terry Ng said the suspension makes sense.
"Right now, there is a lot of uncertainty when it comes to operating in Russia because of the sanctions and retaliatory sanctions," he said. "I am guessing management would like to adopt a wait-and-see approach."
By comparison with Vladivostok, NagaCorp has invested more than $1 billion since 2013 to upgrade the original section of its flagship NagaWorld complex and open a second phase and an underground shopping mall. Work on a $3.5 billion third phase is underway.
"Cambodia is making significant headway as a destination for tourists, and NagaWorld is a beautiful property and has a monopoly," Shepherd said. "It's doing really well."