Star Entertainment shares extend fall on impairment charge warning

Shares of Star Entertainment Group fell to a record on Tuesday, extending losses after the Australian firm warned of an up to A$1.6 billion ($1.11 billion) hit to half-yearly earnings from a proposed casino duty rate hike in New South Wales (NSW).

Australia's second-biggest casino operator has lost about half, or A$1.04 billion, in market value since NSW unveiled the plan on Dec. 19, compounding problems for an industry that has already been dogged by reports of shirking anti-money laundering rules, dysfunctional governance and poor corporate culture.

Shares of the casino operator fell 11.6% to an all-time low of A$1.313 after Monday's near 21% plunge, while the broader market was trading about 0.4% higher.

Star Entertainment said on Monday the duty hike proposal was seen significantly impacting the profitability of Star Sydney and that it would review the assets. Sydney operations accounted for half of the group's revenue in fiscal 2022.

Analysts are baking in an additional A$100 million hit per year for Star if the levies come into force.

Star Entertainment's business in Sydney has been facing multiple challenges, including operating restrictions from mid-September and increased competition from bigger rival Crown Resorts.

Crown Resorts, bought out in a $6.3 billion acquisition by private equity giant Blackstone Inc, opened its gaming floor to gamblers and high-rollers in August after the NSW regulator granted it a licence.

"We estimate Star Sydney will lose around 20% of its table gaming business, and more than half its VIP gaming business to Crown within three years," Morningstar analyst Angus Hewitt said in a note.

Under pressure to lift Star Sydney's performance, the group announced a slew of initiatives on Monday that included loyalty benefits and pricing actions to tackle competition pressure, and cost-control measures.

The group also forecast annual underlying earnings before interest, taxes, depreciation and amortisation that missed Factset consensus of A$446 million.

($1 = 1.4355 Australian dollars)