Australian casino operator Star Entertainment Group Ltd said half-year profit tumbled to its weakest level since listing, as a slump in house wins wiped out the benefits of a return by Asian high rollers.
The 77 percent drop in net profit came in far below analysts’ forecasts and although CEO Matt Bekkier shrugged off the low win rate as part of the normal ups and downs of the industry, shares in Star skidded with investors fretting about earnings prospects.
“Investors are focusing on the three words ‘mixed, difficult and softer’, prompting the market to assume the worst with what could lie ahead,” said Matthew Felsman, a private wealth adviser at APP Securities Pty Ltd.
Star and larger rival Crown Resorts Ltd have been waiting to recover from a decline in VIP revenue after the mass jailing of Crown staff in China in 2016 resulted in a retreat from marketing on the mainland, where gambling is illegal.
That wait appears over as Star’s VIP turnover jumped by nearly half to normal levels. VIPs, however, won at a higher rate than usual, pushing net profit for the country’s No. 2 casino operator down to A$32.9 million ($26 million), compared to a consensus estimate of A$89 million.
Star shares fell as much as 7 percent by mid-session, their biggest decline in two and a half years, giving the company a market value of A$4.7 billion. The broader market was flat.
Bekkier said he was unfazed by the lower win rate since the company had logged several half-year periods of higher-than-usual house wins.
The company said “normalised” interim profit, in which casinos re-calculate results with a consistent win rate to give a clearer view of their performance, rose 12 percent to A$120.4 million.
“I am really, really happy with how this business is developing, how it’s bounced back in the North Asian business and how our diversification strategy continues to get traction,” he said.
A recovery in Asian gambling hub Macau was helping send VIPs to Australia because “no player that comes to Australia has not played in Macau before”, he added.
Star, which plans to build a new resort in the middle of the tourist-friendly Brisbane city, declared an interim dividend of 7.5 cents per share, unchanged from the previous year.
By Byron Kaye
