August 16, 2019 / 8:10 AM / 3 months ago

Star Entertainment wins record haul from Aussie punters as Asians bet less

(Reuters) - Australian casino operator Star Entertainment Group said domestic punters gambled record amounts at its casinos in the full year, sending its shares up 6% on Friday, but underlying profit fell due to dwindling foreign wagers, mainly from China.

The Sydney-based firm reported a 5.4% jump in annual domestic core earnings, undeterred by a cooling economy and sluggish spending in Australia.

Star’s gross domestic revenue of A$1.93 billion ($1.31 billion) accounted for nearly 90% of its total net revenue of A$2.16 billion.

In a separate statement, the casino operator said its Chief Financial Officer Chad Barton has resigned after the company undertook a reorganisation to consolidate its finance, strategy, investor relations and IT functions under the CFO role. Barton will remain with the company until Nov. 1.

The company’s annual normalised revenue from its VIP business slumped 30.7%, as far-reaching effects of bitter trade relations between the United States and China dented confidence among high-spending Asian gamblers.

Domestic revenue in the first half of fiscal 2020 “continues to reflect a cautious consumer environment,” but has improved from the previous half, Star said.

Investors shrugged off the lackluster overseas growth to send shares as much as 9.2% higher against an unchanged broader benchmark. Star shares ended the session up nearly 6%.

Star’s annual domestic revenue is in stark contrast to bigger rival Crown Resorts, which posted in February a 1.2% drop in half-year normalised revenue from Australian resorts.

“Star’s results highlight how their earnings stream is quite different to the Crown model and in a tighter domestic economy, their result isn’t too bad,” said James McGlew, executive director of corporate stockbroking at Argonaut.

Analysts expect full-year revenue of Crown Resorts, Australia’s largest casino operator, to likely drop 7.3% to A$3.23 billion, Refinitiv data showed ahead of the company’s earnings report scheduled for Aug. 21.

Crown shares have slumped about 20.6% since April, when the world’s No. 2 casino operator Wynn Resorts scrapped preliminary talks to acquire the company.

Crown came under further pressure earlier this month after a local gaming regulator started an inquiry into Melco Resorts & Entertainment’s planned $1.2 billion stake buy in Crown.

Operating costs for Star were flat compared with a year-ago period.

Returns from “international whales” can be substantial, but costs of attracting such clients are also significantly higher than for the average Australian punter, McGlew said.

For the year ended June 30, Star’s normalised core earnings, adjusted to remove win-rate volatility and significant items, came in at A$556.5 million. The company had earlier forecast a pre-tax profit of A$550 million-A$560 million.

Star also cut its dividend to 10 cents per share from 13 cents a year earlier.

($1 = 1.4738 Australian dollars)

Reporting by Devika Syamnath and Shriya Ramakrishnan in Bengaluru; Editing by Arun Koyyur and Sherry Jacob-Phillips

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