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Star Entertainment Posts Record Profit, But News Is Not All Good

Thu, Aug 31, 11:39am by Staff Writer

Per the full-year financial results released by Star Entertainment on August 23, covering the period ending on June 30, the casino operator posted a net profit of AUD$264.4 million to set a new company record.

Net profit increased by 36 percent from last year’s AUD$194.4 million, and according to Thomson Reuters I/B/E/S, Star Entertainment easily surpassed the AUD$233.1 million average forecast of six major financial analysts.

Speaking with analysts during a conference call held on the same day, Star Entertainment’s chief executive officer Matt Bekier attributed the net profit gains to an inordinately high casino win rate.

This year, the Star Sydney, Star Gold Coast, and Treasury Casino (Brisbane) venues combined for a win rate of 1.59 percent – up – significantly higher than the 1.20 percent win rate posted over the prior comparable period.

But Bekier was quick to observe that win rates are notoriously fluid, reminding analysts that only 18 months before Star Entertainment recorded a negative win rate:

“That’s just the luck of the draw.”

While net profit was buoyed by an unusually strong win rate, the full financials revealed Star Entertainment to be suffering from the same Macau-related malaise as its rival Crown Resorts.

Using a metric called normalised net profit after tax (NPAT) – which works to balance the impact of unreliable win rates and other “significant items” such as the sale of major assets – Star Entertainment actually saw its numbers fall.

The full-year NPAT of AUD$214.5 million represents an 11.1 percent reduction over the prior comparable period.

As Bekier told analysts during the conference call, this drop-off – which aligns with Crown Resorts’ recently posted 15.5 percent reduction in NPAT – is largely based on the loss of VIP revenue from Chinese patrons in the wake of Crown’s highly publicized arrests in Macau last year:

“The North Asian disruption is lingering.

We dropped a long way in November and December and it’s going to take a little while to climb out of that hole.

We’ve been able to mitigate some of that through diversification.”

The company listed its International VIP Rebate turnover as AUD$39.7 billion, down 19.9 percent year-on-year. Furthermore, normalised revenue within Star Entertainment’s VIP division fell by 18.6 percent to AUD$544.7 million.

Bekier wrote about the company’s plans to counter VIP revenue reductions in the results report:

“Our strategy of diversifying international revenues and providing a more compelling high-end tourism proposition for VIP and Premium Mass customers is showing signs of good growth.

We are also expanding our source markets and sales teams to cover a broader international footprint – with Premium Mass guests visiting from 13 countries in FY2017 – and we continue to assess the North Asian VIP business.”

John O’Neill, who serves as Chairman of Star Entertainment, also used the report to comment on the company’s renewed commitment to its domestic properties with Macau money drying up:

“FY2017 saw further advancement in the Group’s strategy of investing in our core domestic assets and diversifying our international business.

The gaming and non-gaming offerings at our Sydney and Gold Coast properties have been improved following the completion of major capital works.

Initial responses from our customers to the enhanced and new assets have been pleasing.”

Overall gross revenue was reported to be AUD$2.43 billion, representing an increase of 3.2 percent year-on-year.

Domestic revenue also increased, moving to AUD$1.54 billion for a 2 percent year-on-year bump.

Star Entertainment’s board of directors declared a final dividend of AUD$0.085 per share, an amount which is fully franked using the company’s tax rate of 30 percent. This dividend will be distributed on September 26 of this year.

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