Macquarie cuts Star Entertainment valuation, earnings estimates
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The news: Macquarie has slashed its valuation and earnings forecasts on Star Entertainment, anticipating a "significant degradation" in the casino operator's earnings in the 2025 financial year.
The numbers: Macquarie reduced its EBITDA estimates by 52% in FY25, 8% in FY26 and 18% in FY27, reflecting a $200 million cost-out over the next two years and impacts from mandatory carded rules in New South Wales from FY25 and Queensland from FY26.
Macquarie also cut The Star's target price from 45 cents to 24 cents, following earnings revisions, capital expenditure assumptions, $300 million of non-core asset sales and a $350 million AUSTRAC fine.
The 46% target price reduction tracked The Star's one-day 41.1% fall on Friday, after the stock resumed trading following nearly a four-week suspension.
Star shares rose 0.9% to 28 cents by midday AEST, after diving more than 45% since the turn of the year.
The context: Macquarie analysts said The Star's FY24 result, which included an after tax statutory loss of $1.69 billion, was within recent guidance, but they expect "significant degradation" in FY25 earnings given "multiple headwinds".
The flagged that the introduction of mandatory carded play in NSW and Queensland is a "major revenue headwind", and expect further cost-out beyond The Star's existing $100 million program.
What they said: "There is low earnings visibility given so many unknowns, but importantly there are attractive assets that can, and likely will, be monetised, which ultimately creates an equity value back-stop," Macquarie's analysts said.
"That said, execution risk is high, and ultimately the main catalyst for a share price recovery," they said.
The source: Macquarie research
