Star shares plunge again amid warning investors could be wiped out
Ailing casino operator Star Entertainment has a 50 per cent chance of falling into administration, an analyst has predicted, as the gambling company struggles amid a grim cash crunch and plummeting investor confidence.
On Wednesday afternoon, Star – which owns casinos in Sydney and Queensland – announced the company was burning through cash at a rate of about $35 million a month, with only $79 million left.
Despite receiving several loans, Star is in a race against time as it burns through cash. Credit: Louie Douvis
The casino operator, which has battled a series of regulatory failings and scandals, has been crippled by high costs even as it struggles to attract customers. It warned that it would be “challenging” to meet the conditions required to unlock the second tranche of a rescue $100 million loan it negotiated in crisis talks last year.
Shares in Star plummeted 33 per cent to a record low of 13¢ on Thursday and fell a further 17.7 per cent to 11¢ as of Friday 1.45pm AEDT.
In a note to investors, Morningstar analyst Angus Hewitt said Star would be lucky to make it to its interim results on February 28 without a lifeline, as he slashed the firm’s valuation of the company by 60 per cent to 20¢ a share.
“We now incorporate a 50 per cent probability that Star falls into administration and equity holders are wiped out,” he said.
Hewitt said Star could struggle to raise new equity from investors in the current market, pointing out that investors have been burned by previous capital raisings, at $1.20 a share and 60¢ a share in 2023. He said Star was struggling to meet the conditions needed to unlock a $100 million loan facility, adding that operating costs were weak amid poor consumer sentiment and the hit from a move to carded play.
“Star has other potential lifelines, including selling individual assets or finding a potential suitor,” he said. “We still expect a medium-term recovery in operating conditions for casinos. However, Star needs a more immediate solution, and we believe it’s unlikely it can trade itself out of this predicament.”
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