HONG KONG, Oct 13 (Reuters Breakingviews) - Another Australian casino operator looks set for a scrap with watchdogs. A media exposé on Sunday suggested the A$3 billion ($2.2 billion) Star Entertainment (SGR.AX) may face a corporate governance crisis akin to Crown Resorts(CWN.AX). Star, though, is better steeled for a scrap than its beleaguered rival founded by billionaire James Packer.
The approach of New South Wales’ “Freedom Day” on Oct. 11 after a more than three-month lockdown helped Star’s stock recover to near pre-pandemic levels. But allegations including that it enabled suspected money laundering and organised crime sent shares crashing by a quarter by Tuesday’s close.
There are enough parallels with the larger Crown Resorts to spark déjà vu. Star’s leaders are entrenched, with its chief executive and chair having been directors for a decade. The company hosted international high rollers, clientele who featured in Crown’s compliance lapses, and earlier this year regulator Austrac said it was exploring potential problems with anti-money laundering and counter-terrorism financing measures. Like Crown, this comes just as the company is developing multi-billion-dollar properties, including projects on the Gold Coast and in Brisbane.
But forewarned is forearmed. It is two years since similar allegations roiled Packer’s business. Star, which in May made and then two months later withdrew a bid for Crown, was watching and learning. It quickly responded to this week’s reports before following up with more detail to show it is already addressing the watchdog’s worries. Earlier it reacted to regulators’ Crown complaints: For example, the company wound down work with junket operators, which facilitate travel and credit for VIPs, after a report prepared for the New South Wales regulator in February recommended prohibiting their collaboration with casinos. It has since ceased to work with them indefinitely. It is also considering cashless payments, which make following the money easier.
Covid has shown Star can weather hard times. The bottom line turned negative in the year ending June 2020, but the company recovered to report earnings of A$52 million in 2021. It cut operating expenses by 30% compared to 2019 and sold fripperies such as a VIP jet and boat to reduce debt.
There’s no such thing as a safe bet in gambling, and as with Crown, some executives and directors may not keep their posts. But investors with an appetite for risk could roll the dice on Star.
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- Shares in Star Entertainment fell 25% over two trading days, closing at A$3.21 on Oct. 12, after the Sydney Morning Herald and 60 Minutes on Oct. 10 jointly released details of a confidential review accusing the casino operator of failing to rein in money laundering and fraud, despite warnings to its board.
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