Star Entertainment’s share price plummets following bearish write-down

Two independent inquiries in Queensland and New South Wales recommended The Star be stripped of its casino licences, following a 2021 investigation by The Sydney Morning Herald, The Age and 60 Minutes. The investigation alleged the company enabled suspected money laundering, large-scale fraud and foreign interference in its Australian casinos, even though its board was warned its anti-money-laundering controls were failing.

Loading

The embattled casino group will pay its $100 million penalty to the NSW Independent Casino Commission following the findings of the state’s independent Bell inquiry in three instalments; $30 million by March 31st, $30 million by June 30th and the final $40 million by December 29th. The Star has also fronted the costs incurred by former state regulator the Independent Liquor and Gaming Authority (ILGA) in connection with the review – totalling $7 million last month.

The casino operator is further bracing for fines totalling hundreds of millions of dollars after the financial watchdog AUSTRAC launched civil penalty proceedings against it in December over alleged systemic non-compliance with Australia’s anti-money laundering and counter-terrorism financing laws.

The Star was slapped with two additional shareholder class actions by Phi Finney McDonald and Shine Lawyers in Victoria over allegedly misleading conduct last week, meaning the organisation is now preparing to defend itself against four “substantially similar” suits in the Supreme Court of Victoria.

More than $600 million was wiped from The Star’s market value in December after the NSW government announced a proposed tax hike on table games and poker machine earnings in the state’s two casinos.

Casino poker machines would attract a top tax rate of 60.67 per cent under the proposed increase, which is expected to take effect from July next year despite existing tax arrangements between the state government and the two casino groups. It’s been the subject of controversy among industry leaders, shareholders and analysts, who fear the proposal raises sovereign risk issues and an uneven tax environment.

“The Star understands the proposed changes will require legislation to be passed by the NSW Parliament, unless the NSW Government and The Star reach agreement,” the ASX update said.

“If implemented in their current form, the proposed duty rate increases would have a significant adverse impact on the profitability of The Star Sydney, further compounded by the changing operating and competitive environment.”

The Star also announced initiatives expected to generate $40 million annually from 2024, including replacing its contractor “surge” with full-time resources, improving cost control and implementing new loyalty benefits and pricing measures to address competition with rival Crown Resorts in Sydney.