Friendless Star Casino alone in a war zone

Star Entertainment Group is operating in a war zone with a slim arsenal at its disposal and no allies to speak of. The NSW government has made clamping down on gaming a main plank of the March election and the hapless casino operator is quickly becoming its whipping horse.

The NSW treasury has outlined a significant rise in the tax on Star’s pokies and that impost is on top of the tens of millions of dollars the casino operator is spending on regulatory remediation. With Crown Sydney opening its doors last year, Star has also lost its state monopoly.

To further deepen Star’s woes, the Chinese tourism on which Australian casinos rely to boost their revenue is yet to return and the domestic revenue generated by Star Sydney in the half year to December is down 13 per cent from pre-COVID levels.

This combination of ailments has left The Star fighting for its financial future, with its chief executive Robbie Cooke warning of the potential for “an urgent review of Star Sydney’s operating model and assets”.

It isn’t broke, but the company will need to wipe off up to $1.6 billion from the value of its Sydney licence. Putting this into perspective, the market capitalisation of the entire Star group is only $1.5 billion.

Star has already been fined $100 million by the casino regulator, while the financial intelligence agency AUSTRAC has launched a legal action which will likely be settled with a sizable price tag for Star, and three different shareholder class actions have been announced.

On Monday, the company provided a peep into its profit outlook for 2023 financial year – and it was pretty ugly. Although it shouldn’t have come as a huge surprise to investors, the reaction was swift and unambiguous – the stock fell more than 21 per cent by lunchtime.

The prospective imposition of a much higher rate of tax on Star Sydney’s poker machines (and a smallish increase on the tables tax rate) is the main culprit, but its immediate earnings outlook has also been clobbered by additional $40 million in annual remediation costs in 2023.