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One of Australia’s largest casino groups has warned it is running low on cash as it struggles to recover from a bruising investigation into criminal infiltration of its gambling operations and a slowdown in demand from domestic gamblers hit by a cost of living crisis.
Star Entertainment Group, which operates casinos in Sydney, Brisbane and the Gold Coast, lost a quarter of its value on Thursday after it published a trading update for the fourth quarter that showed it had only A$79mn (US$49mn) available to fund its operations, having burnt through A$107mn of cash in the three months to December.
Australia’s once-lucrative casino sector has been rocked by investigations and penalties levied by regulators, due to lax controls related to money laundering and the monitoring of high-risk individuals, many of whom were on junkets from Asia.
An inquiry in 2022 revealed that Macau junket operator Suncity — whose former chair was convicted in 2023 of illegal gambling, fraud and involvement in a criminal organisation — had run an off-site VIP room as part of its agreement with Star.
This involved an illegal “cage” — a room where chips are exchanged for money — in which staff have been shown on video unloading large bundles of cash from sports bags.
Australian casinos have since been starved of that lucrative junket revenue and hit by a significant downturn in domestic trading. The number of gamblers visiting Star’s locations has dropped as competition from pubs and clubs offering “pokies” — gambling machines — and sports betting has grown, amid a cost of living crisis in Australia.
Crown Resorts, a rival casino operator acquired by Blackstone in 2022 after separate investigations and penalties into its compliance with money laundering laws, has cut jobs and recorded a sharp decline in profits as trading has declined in the past two years.
Star’s most recent update has raised concerns over its viability. Its shares fell 28 per cent on Thursday, valuing it at A$415mn, compared with more than A$3bn before the 2022 inquiry.
The casino group, which is also facing fines and refinancing costs in the coming months, said it was continuing to explore options to improve its liquidity, less than six months after it agreed a loan extension with creditors.
It has an additional tranche of A$100mn in loans available, but that requires the casino group to raise A$150mn in working capital. It has worked with UBS to find a partner in recent months.
Star said in a statement that the group continued to work towards fulfilling conditions that had to be met in order to draw down the additional A$100mn, but “a number of these conditions remain challenging to meet given the Group’s current circumstances”.
Kai Erman, an analyst with Jefferies, said the “chips are down” for Star with it facing “extremely difficult” trading conditions and challenges in accessing more capital.
“We see no catalyst for an improvement in earnings in the short term,” he said in a note, with new restrictive gambling regulations in both the states in which Star operates set to come into force.
