The Star, Queen's Wharf Brisbane

Star Entertainment’s Queens Wharf trading update, combined with cost guidance, provided “more relief than surprise” with only 10% total project escalation from materials/labour/logistics, J.P. Morgan writes. 

The update gives the market confidence Queens Wharf will open from 2H CY2023 “within a sensible cost parameter,” the brokerage argues. 

Although cost, regulatory, and wage pressures will persist for the domestic business going forward, August and September should bring closure to NSW & QLD investigations, J.P. Morgan expects.

from our Monday & Tuesday casino PGR observations.

Given the difficulty the brokerage has seen Crown encounter lately for sourcing NSW-based clientele, Star’s strong momentum is likely to remains into FY23, particularly in Sydney. However only once Barangaroo opens will J.P. Morgan have detailed pulse on the impact to tiered play across Star.

Star’s forward 22Y sales guidance of A$1.53bn came in 6% higher than consensus expectations and topline sales momentum have recovered to pre-Covid levels across the group in the June quarter. June domestic sales were 11% up on 2019 levels with slots/non-gaming +28%/26% respectively, the brokerage notes.

An increase in expected costs following delays in Queen’s Wharf / Brisbane. Total project costs will be up approximately 10%, though J.P. Morgan suspects 10% cost inflation is far better than most may have feared given the inflationary environment at present. 

The brokerage notes that Star is likely to provide further commentary at the FY22 result as near-term cost pressures do not appear to have abated in the broader market.