GGRAsia – Star Entertainment profit down 38 pct in 1H fiscal

Star Entertainment profit down 38 pct in 1H fiscal

Feb 16, 2016 Newsdesk Latest News, Top of the deck, World

Australian casino operator Star Entertainment Group Ltd reported half-year net profit after tax down 37.9 percent on the prior-year period. It said in a Tuesday filing that the numbers for the six months to December 31 were affected in particular by a house win rate on gambling by international VIP players that was much lower than the prior-year period.

Group net profit after tax for the reporting period was AUD60.3 million (US$43.2 million). Judged on a normalised basis – assuming a more favourable win rate of 1.43 percent – such profit would have been AUD142.0 million. That would have represented a 26.1 percent improvement on the year-prior period, said the firm.

Star Entertainment – which until November was known as Echo Entertainment Group Ltd – had previously said it has been targeting growth in its rolling chip business among Chinese customers and other tourists from Asia.

The firm has also joined forces with Hong Kong-based Chow Tai Fook Enterprises Ltd – a company founded by the family of a long standing business partner of Macau gaming entrepreneur Stanley Ho Hung Sun – to build a AUD2-billion casino resort in Brisbane, Queensland.

The collaboration – Destination Brisbane Consortium – also includes Far East Consortium (Australia) Pty Ltd, a unit of Far East Consortium International Ltd. The capital expenditure will be split 50:50 between Star Entertainment and its two outside partners.

The casino operator said – in a presentation filed to the Australian Securities Exchange the same day as the half-year numbers – that construction of the new Brisbane resort was expected to start early next year and take five and a half years. It would be funded by “existing and new debt facilities and free cash flow generated by the business,” the presentation stated.

Matt Bekier, managing director and chief executive of Star Entertainment, described the project as “an important strategic step” for the group, which would secure its long-term position in the Brisbane market.

Noting the firm would continue to “expand and improve” its Sydney and Gold Coast properties, Mr Bekier added: “We have also advanced discussions with our Destination Brisbane Consortium partners to secure additional joint venture development opportunities at our Sydney and Gold Coast properties.”

VIP business

What the company terms its “international VIP rebate” business across its three current properties during the interim reporting period saw turnover rise 1.5 percent in the half-year, reaching AUD23.6 billion. Its win rate on international VIP gambling business was 0.88 percent, lower than the 1.33 percent achieved in the year-prior period and also well below the normalised rate of 1.43 percent.

VIP gambling revenue was AUD207.5 million, down 32.9 percent on the prior year. On a normalised basis such revenue would have been AUD338.0 million, a rise of 1.7 percent year-on-year.

“International VIP… business performance year to date is tracking in line with management’s expectations – growth comparison to prior year is difficult given the timing of Chinese New Year,” added the company, commenting on events outside the reporting period and referring to the movable nature of holidays linked to the lunar calendar.

Star Entertainment’s CEO described the company’s win rate on VIP gambling for the period as a “freakish” result. “We’ve looked at the distribution of bets, we’ve looked at the players, we looked at who won, we understood the lifetime history of the players that won – and it’s just bad luck,” said Mr Bekier on a conference call with analysts on Tuesday.

At The Star Sydney (pictured), total earnings before interest, taxation, depreciation and amortisation (EBITDA) for the first half fiscal were down 43.7 percent year-on-year, at AUD91 million. On a normalised basis they would have been AUD223 million, or a 21.7 percent improvement.

The Star’s gross revenue was AUD738 million, down 7.2 percent on the prior year; but on a normalised basis would have been AUD885 million, or 7.9 percent better year-on-year.

Gross gaming revenue from domestic players was up 14.1 percent on the prior-year period, with “strong growth across both tables and slots”; up 14.9 percent and 12.4 percent respectively.

At the group’s existing Queensland casinos – Jupiters Gold Coast and Treasury Brisbane – aggregate EBITDA was AUD102 million, up 28.1 percent. On a normalised basis it would have been lower, at AUD87 million, or an 11.2 percent improvement.

In Queensland operations, gross revenue was up 8.2 percent at AUD370 million, “despite disruption from capital works”. Domestic gambling business was up 4.2 percent year-on-year, with table revenue up 6.0 percent, and slot revenue rising 2.9 percent.

On Friday, Star Entertainment said in a press release it had begun the planning process for a new 200-metre-high (656-foot-high) hotel tower on the ocean side of the Jupiters Gold Coast property. The new tower – including 700 hotel rooms and apartments –will be developed jointly by the casino operator and Chow Tai Fook Enterprises and Far East Consortium, Star Entertainment said.

It would be in addition to an AUD345-million refurbishment of the existing hotel and a 17-storey luxury tower currently under construction. The total investment under consideration for the expansion of the Jupiters Gold Coast property has the potential to reach about AUD850 million, said the casino firm.