A listed Hong Kong property developer, along with a Hong Kong conglomerate founded by a family long-allied to Macau casino market former monopolist Stanley Ho Hung Sun, are each to take a 4.99 percent stake in Australian casino company The Star Entertainment Group Ltd, for what the latter says is an aggregate consideration of AUD490 million (US$375.5 million).
The two investing groups – Far East Consortium International Ltd and Chow Tai Fook Group – will also form a “strategic alliance” with the Australian casino company, according to Far East Consortium.
They are already linked to The Star Entertainment via a new casino project at Queen’s Wharf in Brisbane, the capital of Queensland, Australia.
Chow Tai Fook Group, founded by the family of jewellery entrepreneur Cheng Yu Tung, is also connected – via a privately-held unit called Chow Tai Fook Enterprises Ltd – to a gaming resort project in Hoi An, Vietnam that is also backed by an entity linked to Macau casino junket investor Suncity Group. In December 2016, Chow Tai Fook Enterprises said it had an agreement to own and operate Baha Mar, a previously-stalled casino resort project in the Caribbean archipelago of the Bahamas.
In early March, Far East Consortium said it wanted to acquire a firm with gaming business in the Czech Republic.
A common theme running through several of these initiatives is a desire to target Chinese and other East Asian gamblers when they are either tourists or working on business in such geographically-diverse locations.
The announcement about the respective stake purchases in The Star Entertainment, and the strategic alliance, was given in a Thursday filing by Far East Consortium. On Friday, The Star Entertainment issued a filing to the Australian Securities Exchange offering its perspective.
The Star Entertainment said: “The expanded strategic partnership accelerates and de-risks The Star’s existing capital-light strategy of investing in its core business through joint venture developments with partners who have complementary skills and businesses.” The filing did not clarify the risks otherwise associated with its “capital-light” approach.
The document did clarify the terms of the share subscription agreement: Chow Tai Fook Group and Far East Consortium would separately each acquire 45.8 million new fully-paid ordinary shares in The Star Entertainment – equivalent to a 4.99 percent stake each – at AUD5.35 per share, for a total consideration of AUD245 million each.
The Star Entertainment stated that under the strategic alliance, the partners had “an in-principle commitment” to pursue three Australian projects. It said they were: The Star Gold Coast Precinct Masterplan, in Queensland, with up to “five joint-venture towers with potential for hotel and residential developments as well as expanded entertainment, tourism and retail developments”; further developments at The Star Sydney, including “The Ritz-Carlton Tower development currently in planning approval process”; and The Spit, Gold Coast, in Queensland, including “further developments at the Sheraton Grand Mirage Gold Coast”.
The Star Entertainment’s chairman John O’Neill said in prepared comments in the filing: “The board welcomes Chow Tai Fook and Far East Consortium as shareholders in The Star. Our expanded strategic partnership recognises the strength of our relationships built over the last four years and the shared vision of investing in properties with valuable long-term licences in sought-after destinations.”
The filing did not clarify whether The Star Entertainment would have any involvement in any gaming projects outside Australia involving its new strategic partners.
Far East Consortium noted in a Tuesday press release that the deal would “allow the group to increase its exposure to the Queen’s Wharf development,” in Brisbane, where the group already had an equity stake, and to “benefit from The Star’s future growth”.
The Far East Consortium press release also carried comments attributed to Patrick Tsang, chief executive of Chow Tai Fook Enterprises.
“This investment in the relationship reflects our confidence in the creation of long-term value in destinations that have significant tourism appeal,” Mr Tsang was quoted as saying.
A Thursday note on The Star Entertainment – following the alliance announcement – issued by analysts Donald Carducci, Shaun Cousins and Shalin Doshi at JP Morgan Securities Australia Ltd, said the institution was making no changes currently to estimates for the casino firm’s main gaming floor revenues for Sydney and non-gaming revenues for Sydney and Queensland.
But they stated: “We view this investment favourably as it indicates Chow Tai Fook’s and Far East Consortium’s economic interests in promoting The Star Entertainment through extensive Asian networks.”
The analysts added: “We note the risks surrounding VIP volatility but The Star Entertainment remains the better-performing Australian casino operator in VIP play.”
The JP Morgan team also noted that The Star Entertainment’s new dividend policy was targeting 70 to 90 percent of normalised profit; up from the previous policy of targeting 50 percent of statutory profit.
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Donald Carducci, Shaun Cousins and Shalin Doshi
Analysts at banking group JP Morgan