Star Entertainment Group Ltd (ASX: SGR) shares are up 4% following today’s Annual General Meeting (AGM), which included a trading update.
About Star Entertainment
Star Entertainment Group is one of Australia’s largest gaming and entertainment groups. It owns and operates The Star casino in Sydney, The Star on the Gold Coast and Treasury in Brisbane.
They also acquired the Sheraton Grand Mirage on the Gold Coast in a joint venture and they manage the Gold Coast Convention and Exhibition Centre on behalf of the Queensland Government.
In late 2015, the company name changed from Echo Entertainment Group to The Star Entertainment Group as part of a transition to a single brand architecture across the group.
AGM and Trading Update
This is the first AGM the company has held in Brisbane, which in his opening address Chairman John O’Neill AO described as, “appropriate given the game-changing Queen’s Wharf Brisbane project is now moving at pace.”
Managing Director and CEO Matt Bekier then spoke, and part of his address included an update on the company’s financial performance in FY20 to date.
Bekier said, “for the period from 1 July to 21 October 2019, group domestic revenue is up 1.5% on the previous corresponding period (pcp), with growth in both Sydney and Queensland.”
International VIP Rebate business normalised revenue is up on the prior corresponding period (pcp) for the same period.
Other notable takeaways include:
- Front money is flat on the pcp
- A low actual win rate experienced in the FY20 year to date is negatively impacting statutory results.
Star noted that de-risking initiatives have been implemented, which include restructuring benefits of around $45 million (annualized run rate) expected by the end of the first half FY20.
Profit Guidance
Normalised group EBITDA for the first half FY20 is expected to be between $300 million and $310 million.
Bekier also announced the company’s priorities for the remainder for the year, including
- Execute on the Centre of Excellence operating model and lock in the cost savings
- Deliver on the investment strategy
- Manage the competitive environment, and
- Improve capital efficiency
Buy, Hold, Sell
The market seems pleased with today’s update from Star, which will be a welcome relief for shareholders.
However, I’m not so keen on investing in Star. Competition is coming with rival Crown Resorts Ltd (ASX: CWN) due to open in Barangaroo in a couple of years. While both businesses should benefit from increased tourism in the years to come, I don’t like the capital intensive nature of the industry.
The constant cost of redevelopment and renovation keeps me on the investing sidelines and I’m much more interested in the shares in the free report below.
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At the time of writing David does not have a financial interest in any of the companies mentioned.
