Casino giant Star Entertainment Group’s shares have plummeted to another record low, shedding over 30 per cent in just two days, as the NSW government’s proposed casino tax increase weighs on the company’s future.
Star’s shares closed over 13 per cent weaker to $1.28, having already slipped 20 per cent on Monday, after it flagged a potential $1.1 billion earnings hit if the state government raises the amount of tax leveraged from casino poker machines, a proposal first raised by Treasurer Matt Kean in December. Under the proposed casino tax plan, the non-rebate duty rate will be increased from 17.91 to 20.25 per cent. The current 2 per cent responsible gambling levy will remain. The rebate duty rate will increase from 10 per cent to 12.5 per cent and the poker machine duty rate will increase on a tiered schedule, peaking at 60.67 per cent for a gaming machine generating more than $12.5 thousand in monthly net revenue.
The $1.2 billion embattled casino operator has lost more than half of its value over the last six months and its latest update has got market watchers questioning its near-term financial health. The Star was trading at $3.58 a share a year ago.
Analysts at Morningstar have lowered their share price estimate for The Star from $2.80 to $2.70, with analyst Angus Hewitt noting the company lacks an “economic moat” due to its lack of exclusivity in Sydney, its inability to determine the cost of the potential tax change in NSW and the persistent regulatory uncertainty despite promising growth prospects in Queensland.
The Star had until recently enjoyed exclusivity in the Sydney casino market. However, it now faces stiff competition with the opening of Crown Resorts’ $2.2bn Barangaroo resort last August. It has also had its casino licences across NSW and Queensland suspended last year for failing to stem criminal activity and money laundering.
However, Hewitt said The Star will likely regain its casino licences and said there is some light at the end of the tunnel for the casino operator provided it can ride out the current storm.