Star benefits for Crown uncertainty
The constant uncertainty surrounding Crown Resorts’ new Sydney venue is music to the ears of rival casino operator Star Entertainment, analysts have revealed.
JPMorgan analysts upgraded shares of the Star Sydney operator to “overweight”, citing several tailwinds while pointing out the stock trades at a noticeable discount to Crown.
Crown Resorts opened its highly anticipated Barangaroo venue in Sydney last December, but the casino at the $1.6 billion venue isn’t operational, pending a regulatory inquiry into the operator’s suitability to hold gaming licences.
The results of the investigation are due out in the next two weeks, and it’s possible the Independent Liquor and Gaming Authority will return a ruling of “unsuitability”, meaning risks around the venue will linger into next year, according to analysts.
With the fate of Barangaroo’s gaming operations still up in the air, JPMorgan sees a favourable competitive environment in Sydney for Star, where the company operates Star Sydney.
“Home to The Darling, the only luxury hotel in NSW to be awarded a Forbes 5-Star rating and recognised for three consecutive years, it also features the award-winning $100 million The Star Event Centre.
Another catalyst in the eyes of JPMorgan is Star’s debt reduction plans.
The company had $2.34 billion in total liabilities as of June 2020, according to Wall Street Journal data.
At the height of Australia’s coronavirus shutdown, Star trimmed $10 million a month in operating expenses.
That more efficient operator model, coupled with a revamped loyalty program, could lead to higher margins, noted JPMorgan.
The bank adds shares of Star, which added almost four per cent on news of the upgrade, trade at a price-to-earnings ratio of 19.3 times, a noticeable discount to the 26 times sported by Crown Resorts.
As is the case with other Asia-Pacific gaming markets, this year is expected to be a slog toward recovery for Australia’s operators, with analysts forecasting some type of rebound later in the year.
On that basis, gaming companies in Australia are looking to control costs, with eyes toward a more earnest return to normal in 2022.
JPMorgan said Star will remain committed to cost controls and reining in capital spending this year, as revenue for the 2021 fiscal year at Australia’s casinos is likely to reach just 75 per cent of pre-pandemic levels.
Updates on cost initiatives could arrive on February 18, when both Crown Resorts and Star deliver results for the first half of 2021.
Gambler pleads guilty to scamming Star Sydney out of almost $500,000
A man who scammed Sydney’s Star Casino out of about $500,000 has appeared in court.
The Daily Telegraph reported in January that 36-year-old Hieu Duc Lam did his work at the baccarat table where he stole sums ranging from $10,000 to $44,000 from the casino on 15 occasions.
The corrupt behaviour took place between August and September 2020 before he was arrested in his southwest Sydney home following an investigation by the NSW Police’s Organised Crime Squad’s Casino and Racing Investigation Unit.
Electronic storage devices, $270,000 cash and US$2000 were seized from the address.
A second man was arrested in the casino car park at the same time as a result of the police investigation.
Mr Lam was set to be sentenced last Wednesday, however a five month adjournment was granted on the request of the police prosecutor.
He pleaded guilty to 15 counts of dishonesty to get financial advantage or cause disadvantage by deception last year, with each charge carrying a maximum penalty of 10 years jail if prosecuted.
Sentencing is scheduled for May 28.
