SGR ASX: Star CEO Steve McCann issues bleak casino earnings update, asks for patience

Against all odds, Star Entertainment has managed to avoid sliding into administration for now. But its near demise poses bigger problems for a glittering world that risks being consigned to a bygone era. Hong Kong investors Chow Tai Fook Enterprises and Far East Consortium, which each own 25 per cent of the Brisbane complex, had agreed to buy Star Sydney casino gaming commission‘s 50 per cent stake for $53 million. In September last year, Star’s directors started getting advice on “safe harbour” provisions provided by the Corporations Act that would protect them from being personally liable for debts in the event that it cannot stay solvent.
The company is burning through cash at the rate of $35 million a month, which gives it about six weeks of funds left before emptying its piggy bank. Revenue slumped 19 per cent over the last 12 months, with Star Sydney the company’s worst-performing asset. Morningstar still expects earnings to recover in the medium term as the Queen’s Wharf development ramps up, cyclical discretionary weakness turns and regulatory costs ease. The company has taken an appropriate approach to shareholder distributions with the suspension of dividends during the pandemic. The remains their intention until suitable providing it remains within its target leverage range at the time. Star has arguably underinvested in its Sydney bitcoin casino tournaments, however the $500 million sunk in improving its VIP gaming segment is unlikely to deter Crown casinos from capturing 60% of its VIP market share by fiscal 2025. Boosted by best new Australian casino offers developments in Queensland and a recovery from current headwinds, we project a 5% annual revenue growth for the five years ending fiscal 2029.
Operating margins are forecast to recover to ~12% over the same period, however this remains below pre-covid levels considering the additional tax burden from the New South Wales government. After a delayed earnings release and a turbulent regulatory environment, this entertainment behemoth remains a controversial choice for investors. 3 of those analysts submitted the estimates of revenue or earnings used as inputs to our report. While we recognise that sales of the assets in the business could be worth significantly more, uncertainty in the near term outlook results in a change to our rating. Thanks for all your comments on superannuation today, in light of the Grattan Institute report arguing a government-backed annuity scheme would help more people draw down on their super — sharing a few more here. Here’s how the day’s trade unfolded, with insights from our business reporters, on the ABC News markets blog. Star is also awaiting the outcome of a court decision on fines for breaches of anti-money-laundering regulations that are expected to reach to hundreds of millions of dollars.
The fact that it hasn’t suggests the board and its advisers are engaged in the same hunting expedition as everyone else – attempting to dig out details on this best new Australian casino offers mysterious investor who is now Star’s second-largest shareholder. In an update posted to the ASX on Monday night, Star has confirmed it has agreed to a $300 million rescue package with American casino and BlackCoin gaming platform group, Bally’s. Star — which owns casinos in Brisbane, the Gold Coast and Sydney and employs more than 9,000 people — has warned for months it could fall into administration if a financier was not found.
Before signing the accounts, a board of directors must be satisfied that the company is a “going concern” – that it can pay its debts when they fall due. We’ve obviously been working with them over a period of time on a range of issues, including the importance of the employment that is there, and will continue to do so,” she said. Bruce Mathieson, who operates poker machine and pub empire Australian Liquor and Hospitality with Woolworths, holds about a 10 per cent share in Star and has been interested in buying the Gold Coast casino. It’s been facing serious operational challenges, burning through $107 million in three months and reporting an available cash balance of $79 million to the ASX in January. McCann, for years the chief executive of property group Lend Lease, knows a thing or two about gambling. In recent months, a series of senior executives appointed by Blackstone have parted ways with Crown including boss Ciaran Carruthers and his offsider Justin Casey.
Star Entertainment is negotiating with a property funds management giant that owns a string of major hotels for a $750 million refinancing package that would secure the ailing casino group’s long-term financial future. Chow Tai Fook and Far East, co-investors in Star’s Queen’s Wharf instant crypto casino live chat support in Brisbane, attempted to buy Star’s share of the asset, and shareholder billionaire Bruce Mathieson has made an offer for Star’s Gold Coast casino. The majority of Star’s employees are based in Sydney, and despite recent troubles, its Pyrmont site remains a major tourism destination, with 650 hotel rooms and 36 food and beverage venues.