Star Entertainment's shares tumble as NSW inquiry hearings start

Morgans analysts lowered their target price to $0.65 from $0.70 and said their EBITDA estimates decreased by 15% in FY24 to $194 million due to the decline in premium gaming revenue across all properties and higher operating expense as a result of increased staffing in risk and controls. The analysts kept their ‘add’ rating.

The context: Public hearings in connection with the inquiry undertaken by Adam Bell on The Star’s suitability started today.

Last week, Star reported a slide in revenue for the March quarter as its premium gaming rooms weighed on results.

What they said: “The trading update was disappointing, though the changes to our forecasts/valuation mostly reflect delayed recovery rather than structural reduction,” UBS said.

“We see further regulatory risks ahead for The Star including the outcomes of the second Bell inquiry in NSW, the scale of the Austrac fine, and potential negative revenue impacts from the introduction of responsible gameplay mechanisms.

“On the positive side, main gaming floor revenue is growing again, we see upside risk from returning tourism, and we believe the opening of Queens Wharf Brisbane [QWB] later this year could be a positive catalyst.”

Morgans analysts noted they “ultimately remain positive on the Star regaining its NSW licence given the extensive remediation and the vast internal changes that have taken place”.

“ … further concerns to consider: prolonged weaker economic conditions could negatively impact consumers and weigh further on operations; possible implications from the second Bell inquiry; apprehension about the potential requirement for additional equity injections related to the QWB joint venture debt refinancing planned for December 2025; further construction delays resulting in higher capex and there also exists liquidity risk surrounding The Star’s assets held for sale.”