Macquarie downgrades Star Entertainment to 'underperform'
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The news: Macquarie analysts have downgraded Star Entertainment Group after the embattled casino operator reiterated a challenging liquidity position.
The numbers: The brokerage downgraded the stock to ‘underperform’ from ‘neutral’ and cut its 12-month price target to 20 cents a share, following Thursday's trading update.
Star shares, which have lost more than 60% of their value over the past 12 months, were nearly 4% lower at 18.75 cents in early trading.
The context: Macquarie analysts cut their earnings estimates for FY25 to FY27 citing the liquidity challenges and the overall financial viability of the business.
Star’s chair and chief executive on Thursday told shareholders that the company faced near-term liquidity challenges as revenue has continued to decline significantly while costs of its transformation have continued at inflated levels.
The slump follows implementation of mandatory carded play and cash limits at its casinos after a months-long inquiry found it breached compliance rules, prompting the suspension of its licence to independently operate the flagship Sydney casino and a $15 million pecuniary penalty.
What they said: “Ultimately, the visibility on earnings is low, and liquidity is a key risk. The fast-tracking of non-core asset sales and cost-out may reduce some of this risk, but our caution levels have increased, with business yet to show signs of stabilisation, or a near-term pathway to profitability and positive cash flow,” Macquarie analysts said in a note.
The source: Macquarie Research
