SGR downgraded on soft consumer outlook: JP Morgan

A soft domestic outlook and potentially weak consumer sentiment over the next few months will subdue Star Entertainment Group’s earnings in their Sydney and QLD properties, according to analysts from JP Morgan.

The brokerage announced earlier this week it has downgraded Star Entertainment Group (SGR) to Neutral.

According to JP Morgan analyst Don Carducci, soft domestic consumer spending will impact table games revenue growth – which is expected to reach 0.9 percent growth in 20H1. There will be limited near-term recovery as well, due to the opening of Barangaroo at the end of 2020. 

VIP margins are also expected to compress and unlikely to recover in the short term, said Carducci.

“Although initial interest in Barangaroo will likely be strong when it opens two to three months earlier than originally announced (FY21H1), the negative impact of two casinos in one location is the gambler’s ability to ‘choose’. Competitive promotions to capture and maintain local, finite gamblers pose margin risk,” said the analyst. 

The recent bushfires in Australia have also diverted some discretionary spending into donations and made consumers less willing and cautious to spend whilst others are struggling. 

JP Morgan said it has downgraded Star’s rating to Neutral, with subdued earnings growth in Star’s Sydney and QLD properties due to the soft consumer outlook. 

That being said, Queens Wharf & hotel room expansions remain, key long-term drivers. 

Previous articleSkyCity Adelaide rolls out Tiger Baccarat
Next articleSecond Primoyre casino to open in March

Related Articles

Covid-19 turns out lights in most of Asia’s casinos

From India to Australia, casinos across the Asia Pacific region have closed their doors in response to efforts to combat the spread of the coronavirus, with little to no visibility at present as to the evolution of the situation.

JP Morgan ups forecasts for Crown/Star FY21 EBITDA

J.P. Morgan said it has raised its FY21 estimate for Star Entertainment Group's EBITDA by 10.7 percent due to stronger revenue from Queensland and better margins. However, it has downgraded the stock from overweight to neutral with a price target of A$3.50.

Credit Suisse suggests Crown-Star merger

Credit Suisse believe it's time to examine the possibility of a Crown-Star tie up in light of both companies' reduced revenue from the pandemic and China's clampdown on overseas gambling activities.

The Star to make second application for Sydney waterfront development

The Star Entertainment Group is planning a second development application at its waterfront site in the Sydney suburb of Pyrmont, this time for a two-tower, six-star hotel that would cost approximately A$1 billion (US$720 million).

Star July gaming revenue at 80% of prior year; domestic investment bears fruit

Star Entertainment Group said its domestic gaming revenue in July reached 80 percent of the prior calendar year and that investment in its properties will enhance long-term growth potential.

The Star fined for breach of social-distancing rules

The Star casino in Sydney has been fined A$5,500 (US$3,831) for breaching public health orders after patrons were seen “standing and mingling between groups” on Saturday night, local media reports. The fine was issued by Liquor and Gaming NSW and is the second fine to be issued by the enforcement agency after Double Bay’s Golden […]

No exclusivity agreement for The Star in Queensland

The state government of Queensland posted a statement on Saturday indicating that it was suspending negotiations with the Star Entertainment Group over a proposed thirty-year exclusivity deal. State Development Minister Kate Jones declared, “Through the exclusive negotiation process for a Gold Coast Global Tourism Hub we worked really hard to extract value from The Star, […]

Half of Star slots operational on opening: JP Morgan

Half of the slot machines were in operation on the first day of opening to the general public of Star Entertainment’s property in Sydney, though business appeared to be brisk, according to analysts at J.P. Morgan.

Australia properties announce latest reopening steps

Star Entertainment says it moves to the next stage in reopening at its Sydney property from Wednesday, whilst casinos in Queensland get ready to open their doors from Friday.
Star Entertainment

Star estimates costs of Covid-19 shutdown

The Star Entertainment Group, required by the Australian government to suspend its operations since March 23, has provided an update of its activities, including an estimate of its cash burn during the enforced shutdown. In a statement to the Australian Stock Exchange on Thursday, Star offered the estimate that a three-month shutdown until June 30 […]