Star Entertainment Group operates integrated resorts with gaming, entertainment and hospitality services. Star also manages the Gold Coast Convention and Exhibition Centre on behalf of the Queensland government and invests in a number of strategic joint ventures. Shares in Star are materially undervalued versus our unchanged $1.20 fair value estimate post the company’s first-half FY24 result. Granted, there are headwinds – remediation costs weigh on profitability, and VIP gaming is suspended. We expect the suspension to persist through FY24 as Star focuses on proving it is suitable to hold its casino licenses, following the launching of a second inquiry by the NSW regulator.
We expect Star to eventually prove suitability and ultimately retain its casino licenses. With no more geographic exclusivity, competition is also proving intense, and Crown Sydney has gained from disruption to Star’s Sydney casino, winning market share since opening its gaming floor on the other side of Darling Harbour in early FY23. In our view, investors are too focused on the troubled near-term, and are overlooking Star's earnings potential as conditions normalise. We expect earnings to recover from FY25 as operational restrictions ease, VIP players begin to return, and main-floor table gaming further recovers. There are two major sources of uncertainty, however, for which investors should require a high margin of safety for investment – the size of the Austrac fine and the eventual outcome of the Sydney casino license review. New debt facilities of $450 million with more flexible covenants, as part of the FY24 recapitalisation, mean Star has plenty of headroom to pay its penalties and see through lower near-term earnings.
Tags
Westpac Banking Corporation is the third-largest of the big four commercial banks by market capitalisation and offers a full suite of financial services to more than 13 million customers. Westpac’s first-quarter FY24 profit of $1.8 billion was little changed from the final quarter of FY23, with interest margin pressure and higher bad debts well managed.
Read MoreSuper Retail Group is the owner of the Supercheap Auto, Rebel, BCF and Macpac brands, which have positions in growing high-involvement lifestyle categories of auto, sports and outdoor leisure. The company has more than nine million active loyalty club members, and sells via a network of 716 stores and online. Super Retail’s first-half FY24 sales
Read MoreFortescue is Australia’s No.3. iron ore miner behind Rio Tinto and BHP, and also has a growing green energy business via the company’s Fortescue Future Industries division. A monster $1.08 per share fully franked dividend was the highlight of Fortescue’s first half of FY24, up 44% on last year’s $0.75 per share interim payout. The
Read MoreColes Group is Australia’s second-largest supermarket chain, whose retail offerings included fresh food, groceries, general merchandise, liquor, fuel and financial services through its store network and online platforms. The value gap between Australia’s two largest supermarket operators has been dramatically closing over the space of a week, following their first-half FY24 results. However, both defensive
Read More