Source : THE AGE NEWS
Ailing casino operator Star Entertainment has a 50 per cent chance of falling into administration, an analyst has predicted, as the gambling company struggles amid a grim cash crunch and plummeting investor confidence.
On Wednesday afternoon, Star – which owns casinos in Sydney and Queensland – announced the company was burning through cash at a rate of about $35 million a month, with only $79 million left.
Despite receiving several loans, Star is in a race against time as it burns through cash. Credit: Louie Douvis
The casino operator, which has battled a series of regulatory failings and scandals, has been crippled by high costs even as it struggles to attract customers. It warned that it would be “challenging” to meet the conditions required to unlock the second tranche of a rescue $100 million loan it negotiated in crisis talks last year.
Shares in Star plummeted 33 per cent to a record low of 13¢ on Thursday and fell a further 17.7 per cent to 11¢ as of Friday 1.45pm AEDT.
In a note to investors, Morningstar analyst Angus Hewitt said Star would be lucky to make it to its interim results on February 28 without a lifeline, as he slashed the firm’s valuation of the company by 60 per cent to 20¢ a share.
“We now incorporate a 50 per cent probability that Star falls into administration and equity holders are wiped out,” he said.
Hewitt said Star could struggle to raise new equity from investors in the current market, pointing out that investors have been burned by previous capital raisings, at $1.20 a share and 60¢ a share in 2023. He said Star was struggling to meet the conditions needed to unlock a $100 million loan facility, adding that operating costs were weak amid poor consumer sentiment and the hit from a move to carded play.
“Star has other potential lifelines, including selling individual assets or finding a potential suitor,” he said. “We still expect a medium-term recovery in operating conditions for casinos. However, Star needs a more immediate solution, and we believe it’s unlikely it can trade itself out of this predicament.”
NSW Premier Chris Minns ruled out providing any cash support or tax breaks for the Star this week, insisting that his government had done all it could with a jobs agreement that was signed with the embattled gaming giant last year.
“We have done our bit when it comes to that,” Minns said on Thursday. “It has to be run on commercial grounds, and it’s a matter for Star, their ownership and their management.”
Tribeca Investment Partners portfolio manager Jun Bei Liu said Star was in a dire situation and was running out of time and money.
“Liquidity is a huge issue now, trading is slow and all the regulatory compliance is taking effect, and at the same time, you have an uncertain outcome in terms of the AUSTRAC fine,” she said.
Liu agreed with Morningstar’s analysis and said the company was likely to fall into administration unless it could convince more investors to provide capital.
“They’ve been wanting to sell the Queensland assets … that could alleviate some … but the challenge is they’re running out of time,” she said.
The United Workers Union (UWU), which represents 8000 employees across Star, said job security for workers should be the primary concern for all stakeholders.
UWU casinos director Andrew Jones said casino workers “are tired and incredibly frustrated at bearing the brunt of financial and operating licence instability as a result of management failures over the past four years”.
“The future of The Star cannot be determined without addressing the real human impact of this crisis,” he added. “Workers deserve clarity, stability and a commitment of preserving their jobs, not just from the company but from state governments. It’s time for all stakeholders to act decisively to protect the livelihoods of thousands of casino workers and their families.”
