On 21 February 2019, The Star Entertainment Group Limited (ASX: SGR), a company from the Consumer Discretionary sector and into the business of gaming, entertainment and hospitality, announced its 1H FY2019 results.
During the period, the company’s statutory gross revenue was up by 5.0% as compared to its prior corresponding period. The net revenue increased by 14.9% to $1,150 million, EBITDA by 65.9% to $331 million and NPAT by 351.4% to $149 million as compared to its prior corresponding period.
The period reported strong domestic performance. The group revenue was up by 6.3%, where revenue from Sydney increased by 9.9%. The period reported a robust tables growth, where the group’s revenue was up 6.4% on prior corresponding period. Queensland’s revenue was up by 10.6%. There was a growth in the normalized gross revenue by 22.6% from the Gold Coast.
The sales were solid in the Mixed VIP segment in the slower market due to increased visitation by 10% on the prior corresponding period. Queensland reported growth in this segment; however, Sydney underperformed. The EBITDA was maintained during the period despite rate card reductions.
During the period, the new assets performed well. The Gold Coast visitation increased by 11.8% on the prior corresponding period. The plan for Gold Coast expansion and Sydney Sovereign Resorts upgradation is under progress. The company is expecting QWB lump sum price contract in the fourth quarter of FY2019. The capital expenditure reduction is in line with guidance. The marketing initiatives for Chow Tai Fook/ Far East Consortium is under progress.
SGR declared its interim dividend of 10.5 cents per share, representing an increase of 40% as compared to the prior corresponding period. Increase in the dividend is a proof of excelled business performance, planned investments and cash generation.
The business in Sydney reported a strong domestic performance with statutory EBITDA up by 59% to $171 million, driven by effective cost management which also supported the margin growth. The domestic gaming was up by 6.5% as a result of increased visitation by 1.7% on pcp. The revenue was up by 9.9% on pcp, and tables revenue increased by 4.9% on pcp and was driven by PGR. The hotel operation cash revenue was up by 4% on pcp which got offset by F&B refurbishments. During the period, the cost declined by 3.9% on pcp as a result of increased domestic volumes and higher wages, which got offset by lower international gaming volumes.
The EGM market share in 1H FY2019 was 9.4%.
The business in Queensland reported an increase in the statutory gross revenue by 31.3% to $531 million on pcp and EBITDA by 74% to $160 million on pcp. The domestic growth was above the system, mainly driven by an increased visitation by 5% on pcp. The Slots gained market share in Gold Coast and Brisbane. The revenue from Queensland increased by 2.9% on pcp. The table revenue reported robust growth in Gold Coast and Brisbane by 10.6%. There was an increase in revenue by Non-gaming by 5.8%. The VIP turnover increased by 88% to $6.8 billion on pcp as a result of growth from existing and new gold coast customer. There was an increase in the operating cost by 7.5% as a result of increased volumes (domestic and international gaming, non-gaming), newly commissioned assets and investment in initial service levels at the Gold Coast, higher wages.
The EGM market share for Brisbane was 23.2% and for Gold coast was 33.7%
New assets were commissioned successfully during the period with a favorable response to newly commissioned assets due to increased visitation by 11.8%. The company generated an increased normalized gross revenue of 22.6%. The Domestic table revenue increased by 8.3%, non-gaming revenue was up by 7.2%, VIP normalized turnover increased by 90.9% and F&B cash revenue by 9.7%.
2H FY2019 outlook
The company expects to improve returns across the group, deliver next stage of capital plans, commercialize expanded CTF and FEC strategic partnership as well as the full implementation of the operating model around centres of excellence.
By the end of the trading session on 21 February 2019, the closing price of the share was A$4.650, up by 5.682% as compared to the previous trading day’s closing price. Today, the stock is trading at A$4.605, down by 0.968% with a market capitalization of A$4.27 billion with approximately 917.32 million outstanding shares.
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