Today, the Australian casino giant Star Entertainment Group Ltd revealed that the tension caused by the US-China trading war has been having a negative impact on both Asian gamblers’ confidence and the company’s profit, resulting in the largest share decline it has experienced since listing.
The information revealed by Star Entertainment comes to demonstrate the significant impact which the long-running dispute between the US and China is having, especially in the light of the 25% punitive tariffs which the US has already imposed on some goods, and the ones which are expected to follow.
The Australian casino company is set to begin slashing hundreds of jobs in a few days, as part of its efforts to offset the negative impact of the falling demand from wealthy foreign high-roller gamblers. As mentioned above, Star’s share price fell to its four-year lowest today, following the gambling operator’s announcement of an AU$18-million reduction to its profit projection for the current fiscal year.
Star Entertainment forecast full-year EBITDA (earnings before interest, tax, depreciation and amortisation) worth AU$555 million and blamed both the weaker domestic growth and the significant decline in VIP gamblers’ revenue for the change projection change.
Star Entertainment’s VIP Gamblers Turnover Suffers a 31% Decline
For the time being, Star Entertainment operates casinos situated in Sydney, the Gold Coast and Brisbane. The gambling operator also heavily relies on gambling revenue generated by VIP players, especially Chinese high-rollers. Unfortunately, the weaker economic conditions in China and the ongoing trading war between China and the US had had a negative impact on the company’s performance.
Star Entertainment reported that its turnover from VIP gamblers suffered a 31% decline to June 8th, with so-called high-rollers spending 16.5% less money in the period from January to May 2019. As explained by Matt Bekier, Chief Executive Officer of Star Entertainment, the confidence between the most affluent VIP players was also lower, with some of the biggest customers of the brand spending only a day or two at the casino, instead of a whole week as they used to do.
According to Mr Bekier, the positive thing is that the customers are still coming to Star’s venues. As he explained, they do not seem to be spending as much as they did in the past. Players have also beat the house more than initially expected, with an actual win rate exceeding the theoretical win rate for the current fiscal year.
Back in February, the company did not provide a full-year profit projection at the time it announced its half-year earnings. Still, analysts had expected that the pre-tax profit that would have been reported by Star Entertainment to amount to approximately $AU602 million.
Furthermore, the projections for the high-roller market remains poor despite some previous forecasts for a change. In April, analysts have shared optimism about a turnaround in the VIP market in the upcoming fiscal year but Star Entertainment’s CEO does not believe that a substantial increase is on the way. As mentioned above, the weak high-roller trends reflect the softening market volumes in China mainland – a trend which analysts attribute to the ongoing trade war between the US and China.
- Author
Daniel Williams
