Star Entertainment Group released its latest financial figures to the Australian Stock Exchange and they do not make fantastic reading. Although the company made a huge profit, those profits were down 8.4 percent compared to the previous reporting period.
The owners of The Star Sydney, The Star Gold Coast, and Treasury Casino & Hotel saw three main indicators fall. Net Revenue fell 0.9 percent to $2,161 million, EBITDA dropped 2.0 percent to $557 million and Normalised Net Profit After Tax slumped 8.4 percent. That net profit was still $224 million for the year ending June 30, a shortfall of more than $20 million.
Blame for the significant reduction in revenue and profits fell at the feel of “International VIP Rebate”. Although the unique number of high rollers increased 10 percent, those well-heeled VIPs spent far less per visit than last year. According to the financial statement, international VIPs generated $42.4 billion of turnover, a dramatic reduction of 30.7 percent.
International VIPs visited the group’s casinos more frequently, but spent less and won more. The theoretical win rate for the high rollers is 1.35 percent, yet they won at a rate of 1.38 percent. Last year, VIPS enjoyed a win rate of 1.16 percent.
Super rich Chinese gamblers make up the bulk of all Australian casinos’ international VIPs; they often turnover millions of dollars per hour. The current trade war between the United States and China has created uncertainty for Chinese businessmen. As has the softening economic growth in China.
Also, the entire Australian gambling industry has been hit with allegations and revelation regarding rich Chinese businessmen and women. A joint investigation by 60 Minutes, The Age, and The Sydney Morning Herald has rocked the industry.
That investigation claims Crown Resorts, Australia’s biggest casino operator, employed Chinese junkets to recruit gamblers. These junkets allegedly have links to organized crime gangs and the Triads. Indeed, a proposed sale of Crown Resorts stock by James Packer is currently under the microscope. Packer agreed to sell $1.75 million worth of shares to Melco Resorts and Entertainment. However, Melco’s CEO Lawrence Ho, son of Stanley Ho, was a director of a blacklisted company at the time of the sale. Stanley Ho, who enjoyed a gambling monopoly in Macau, has long been linked with criminal organizations.
Chief Executive of Star Entertainment Group Matt Bekier explained the group had measures in place to prevent money laundering. Bekier, who received in excess of $3.3 million last year, also said the group worked closely with law enforcement authorities. The Star Group’s CEO also revealed they had not been caught up with the same investigation of Crown Resorts.
“In terms of the regulatory action, we have not really been caught in the same inquiries that others have. The ASIC [Australian Securities and Investments Commission], for example, we have not had any contact from them.”
Bekier was keen to point out the current trade tensions between the United States and China were having a negative impact on his company’s fortunes.
“They [rich Chinese gamblers] are looking at tensions between China and the US, they are not sure what the next year is going to look like and they are holding back. They still show up – they have business interests in Australia, kids at university – but when they show up to play they don’t take the same risk.”
It was not all doom and gloom, however, as the company revealed strong growth in its domestic business, which makes up 88 percent of its earnings. The company is also undergoing a restructuring that has so far achieved $40 million in cost benefits.
Investors reacted positively to the financial report with the share price rising 5.866 percent to $3.79 per share.