Is Star Entertainment Group’s Share Price Worth A Look Now?

  • Jul 15, 2020 AEST
  • Team Kalkine
Is Star Entertainment Group’s Share Price Worth A Look Now?

Summary

  • With economy reopening phase wise, casino operators are reopening their facilities, under new safety protocols.
  • Failed exclusive negotiations between Star and Queensland Government, coupled with cessation of broader market process for a second casino licence on the Gold Coast, would enable Star Entertainment to focus on executing its multi-billion-dollar investments.
  • Liquor & Gambling NSW to impose a fine of AU$5,000 on Star Casino for breaching public health protocols.
  • With increased permitted capacity and visitation, trading performance at The Star Sydney in June 2020 improved over the month.

Casino operators were hit hard by coronavirus-led restrictions and other measures. As ‘non-essential businesses’, the operators were forced to shut down the facilities during lockdown. However, as economy is reopening phase wise, the operators are recommencing their operations, on a limited basis, boosting shareholders’ confidence. 

Must Read: Australia COVID-19 restrictions, What is allowed and what is not

SGR and Queensland Government Conclude Exclusive Negotiation Process

On 13 July 2020, The Star Entertainment Group Ltd (ASX: SGR) announced that the company and the Queensland Government have mutually agreed to end the exclusive negotiation process concerning a Global Tourism Hub on the Gold Coast. The decision was made after the two sides failed to reach consensus around the terms for long-term casino licence exclusivity.

Moreover, the state government ceased the broader market process for a second casino licence on the Gold Coast, highlighting no plans for reviving the process.

The exclusive negotiation conclusion and the market process cessation are likely to enable the Company to focus on executing its multi-billion-dollar investments in South East Queensland.  

The Company has committed government investments on the Gold Coast by 2038 including

  • Gold Coast masterplan valued at AU$2.2 billion
  • 650 additional hotel rooms
  • 2,000 luxury apartments
  • 9,000 and 2,800 construction and operational jobs, respectively

The Star Entertainment and its partners have committed around AU$4.5 billion to strengthen tourism in South East Queensland, according to SGR Chairman John O’Neill AO.

COVID-19 Breach at Sydney Venue

On the same day, the Company released another market update, unveiling that NSW Health informed SGR regarding a coronavirus case arising out of its Sydney venue. The case came up despite the implementation of ‘COVID-Safe Plan’ upon reopening of the facilities. 

Liquor & Gambling NSW would fine the Company AU$5,000 for breaching public health protocols, according to a 13 July 2020 announcement by the agency.

Meanwhile, the NSW government has announced new measures including reduced group bookings from 20 people to 10 at pubs and no more than 300 patrons allowed at large venues, owing to growing cases of coronavirus across the state. The new measures will come into force on 17 July 2020.

Related: Second Wave of Infection: NSW Under Spotlight with Surge in Coronavirus Cases   

Multiple Properties Reopening

On 1 July, SGR announced an update on multiple properties’ reopening that lifted shares by more than 4%. SGR Sydney property, The Star Sydney, which reopened on 1 June on a restricted basis, was to experience further restrictions being lifted on 1 July. The next stage of reopening from 1 July 2020 was to allow:

  • Casino area to host a maximum of 5k patrons at any one time, based on expected open areas, determined by a minimum of 4m2 each person as required by the New South Wales Government;
  • Spatial distancing at gaming positions with must implemented appropriate signage and minimum 1.5m distance maintained between individuals not from the same household;
  • The Star Sydney to open to loyalty club members, their guests, and the general public, with at least one member of a guest group required to provide their details upon entry, as required by the state government.

On 3 July, The Star Gold Coast and Treasury Brisbane’s gaming facilities were due to reopen with a maximum 2.6k to be hosted at the former and 2.3k at the latter, aligning with the 4m2 each person rule. The Company expected its Queensland properties to ensure that spatial distancing requirements were met for its gaming positions with the venues open.

Interesting Read: Share Prices Making Noise: SRG Global, MACA, Tamawood and dorsaVi

The Company also announced an update on its trading performance for June 2020, highlighting improved trading performance at The Star Sydney in June over the month with increased permitted capacity and visitation.

Because of operating restrictions, invites were meant only for private gaming room customers. Since 19 June 2020, average daily slot and table gaming volumes became comparable with 1H FY2020 private gaming room levels. Over June 2020, average spends per visit for those patrons who have visited were substantially greater than the levels of first half of FY2020.

The management claimed that the performance of The Star Sydney in June 2020 has been consistent with expectations.

Funding Financial Close Reached for Queen’s Wharf Brisbane   

The Star and its JV partners in the Destination Brisbane Consortium closed a project funding worth AU$1.6 billion for Queen’s Wharf Brisbane in June 2020.  The Company had highlighted receiving the AU$1.6 billion project-level debt funding commitments for Queen’s Wharf Brisbane (QWB Funding) in its 1H FY2020 results announced on 20 February 2020.

On 15 May, the Company announced to have executed facility agreements for the QWB Funding as per the commitments received. The first draw-down on the QWB Funding, which is for a period of 5.5 years, has been received in June 2020.  

Also Read: Star Entertainment Group Updates on Pandemic Mitigation Actions, Stock in Green

Stock Performance

The closures caused by the coronavirus crisis significantly impacted the casino operator’s share price. On 20 March 2020, the stock experienced its lowest performance at A$1.62. Since then, the stock witnessed several ups and downs, with its stock closing at AU$2.700 on 15 July 2020, moving upward by 2.662%. The Company has a market cap of AU$2.49 billion and an annual dividend yield of 7.79%. The last three-month return of the stock was noted at 11.91%, while in six months, the stock delivered a negative return of 42.83%.

Must Read: Guide to Portfolio Strategies and Investment Avenues to Wade Through COVID-19 Crisis

 


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