Star Entertainment Group Limited

Team Veye | 05 Jan 2021 ASX - SGR
Star Entertainment Group Limited
Call Buy

The Star Entertainment Group Limited (ASX: SGR) operates in the gaming, entertainment and hospitality industries. The Company operates The Star Sydney (Sydney), The Star Gold Coast (Gold Coast) and Treasury Brisbane (Brisbane). The Company also manages the Gold Coast Convention and Exhibition Centre on behalf of the Queensland Government and invests in various strategic joint ventures. The Company's segments include Sydney, Gold Coast and Brisbane. The Sydney comprises The Star Sydney's casino operations, including hotels, apartment complexes, restaurants, bars and night club. The Gold Coast segment includes Jupiters' casino operations, including hotels, theatre, restaurants and bars. The Brisbane segment includes Treasury's casino operations, including hotels, restaurants and bars. The Company also manages the Gold Coast Convention and Exhibition Centre on behalf of the Queensland Government. The Company also owns Broadbeach Island on which the Gold Coast casino is located (Profile source: Reuters)

From the Company Reports

Update on COVID-19 operating restrictions in NSW and Queensland

The Star Entertainment Group Limited (ASX code: SGR) (The Star) on 3 December 2020 referenced the NSW Government’s announcement of 2 December 2020 about COVID-19 related restrictions that applied to larger hospitality venues (including The Star Sydney) with effect from Monday 7 December 2020.

(Chart source: TradingView)

The easing in operating restrictions includes an increase in the number of patrons as permitted under the 1 person per 2sqm rule (previously 1 person per 4sqm) and the removal of the 300 patron cap per area. Notwithstanding these changes, The Star Sydney was still required to comply with the rules regarding spatial distancing between gaming positions. The changes permit The Star Sydney to increase patronage from the current maximum of 1,800 patrons at any one time within the casino area to up to approximately 10,000 patrons, based on the square metreage of the property.

The Star Entertainment Group Limited announced its AGM Presentation on 22 October 2020.

Group Year to date Trading Update

Trading update for the period from 1 July 2020 to 15 October 2020

  • Group domestic gaming revenue ~75% of pcp with group domestic revenue ~70% of pcp on reduced capacity at all properties
  • The Queensland properties have traded strongly with domestic gaming revenue broadly in-line with the prior period
  • Sydney continues to be impacted by the more onerous constraints on the operations of the property – patron caps per area and no co-mingling between areas
  • Group loyalty gaming revenue remains strong, enhanced by the newly opened Sovereign PGR in Sydney

(Graphic Source – Company Reports)

  • Operating costs managed during restricted operations resulting in domestic EBITDA margin improvement in 1QFY2021, despite lower revenues
  • Negligible VIP turnover given border closures
  • Strong cashflow generated, enabling significant debt reduction ($145m in 1QFY2021)
  • Restrictions may change over the remainder of the year which could materially impact revenues

Update on debt covenant waivers and JobKeeper Program

The Star Entertainment Group Limited (ASX code: SGR) announced on 6 October 2020 that it had reached agreement with its debt providers around amendments to debt covenants and provided an update on the application of the Federal Government’s JobKeeper program.

Debt covenant waivers and amendments

The Star has secured covenant support from its debt providers for the 31 December 2020 and 30 June 2021 testing dates as follows.

  • In relation to the 31 December 2020 testing date, The Star’s debt providers have agreed to a full waiver of its gearing and interest cover ratio covenants.
  • In relation to the 30 June 2021 testing date, The Star’s debt providers have agreed to an amendment of its financial covenant ratios, resulting in enhanced gearing and interest cover ratio headroom for that testing date.

Other than this covenant support, there are no material changes to margins or terms of the existing debt facilities.

JobKeeper update

The Star successfully applied to participate in the Federal Government’s JobKeeper Payment wage subsidy scheme (JobKeeper) in April 2020, with almost 7,000 staff eligible under the scheme.

The Star Entertainment Group Limited (ASX: SGR) (The Star Entertainment Group) on 20 August 2020 provided its FY2020 Results

(Graphic Source – Company Reports)


  • Strong performance pre-COVID19 (Jul 2019 to Feb 2020 vs pcp), COVID19 shut-down a material impact on full year results
  • Normalised NPAT up 15.6% pre-COVID19, down 46.0% full year
  • Domestic EBITDA up 8.3% with margin expansion pre COVID19
  • Comprehensive response to mitigate COVID19 impacts
  • Safeguarded staff and customers
  • Secured $200m additional liquidity and June 2020 covenant waivers
  • Preserved cash (reduced OPEX and CAPEX, underwritten interim dividend)
  • $112m post-tax significant items largely COVID19 related
  • Key milestones attained over FY2020 which drive significant long-term value
  • Agreed Sydney gaming tax arrangements and casino EGM exclusivity to FY2041
  • Favourable conclusion to Gold Coast second casino licence process
  • Completed QWB financing on terms agreed pre-COVID19

(Chart source: Barchart)

  • Focused on safe and effective management of reopened properties
  • Cost management and asset recycling initiatives
  • Mitigate impacts from Sydney competition
  • Positive early 1H FY2021 trading
  • Revenue impacted by COVID19 restrictions
  • July domestic gaming revenue ~80% of PCP, margins similar to PCP (ex JobKeeper)
  • July materially cash flow positive after investments, enabling debt reduction


Key Financials

price to Revenue Ratio (TTM)


Price to Book (FY)


Price to Sales


Debt To Equity Ratio

0.4690 (Debt to equity ratio has increased from 27% to 45.7%over the past 5 years))

Gross Profit


Annual Dividend Yield (%)




Peer analysis




Market Cap

Annual Yield

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The Star Entertainment Group Limited (ASX: SGR) 
Stock Overview
Sector Services
Risk Medium
Market Cap $3.57 billion
Share Volume 952.01 million
EPS (FY) -$0.10
Yearly Dividend Yield  5.47%
Target Price (s) T1 $4.40    T2 $5.90
Stop Loss $3.30
Recommendation BUY
52 weeks High $4.79
52 weeks Low $1.53
CEO Mr Matthias Michael Bekier
Non-Executive Directors Mr Richard Sheppard


Market Risk Analysis

NSW Government’s announcement in relation to COVID-19 related restrictions that apply to Greater Sydney in light of the growing COVID-19 cluster centered on the northern beaches will impact The Star Sydney property.


Technical Analysis

Technically the stock has remained in a bullish phase from the month of March but encountered trend reversal between June-July. The month of August witnessed a bullish trend which continued till the current month of December. At the current juncture, the stock price is trading above the middle band of the Bollinger and is expected to continue the upside move, well supported by the oscillating indicators RSI and MACD well in a positive zone. The scrip holds a minor resistance at $3.86, Managing to close above this can have the potential to push the stock to continue the upside momentum.


Veye’s Take

The Star Entertainment Group continued executing its growth strategy despite an unprecedented environment. Whilst the impacts of COVID19 has been extraordinarily challenging, the fundamental earnings prospects for The Star remain unchanged, underpinned by valuable long-term licences in sought after destinations. Major projects at Queen’s Wharf Brisbane and The Star Gold Coast were proceeding to plan, with the upgraded and expanded Sovereign at The Star Sydney delivered on time and budget. The Star delivered record normalised and domestic earnings for July 2019 to February 2020 on a PCP basis before the full impact of COVID19. This reflected growth from investments, operational improvements and cost management benefits. SGR revenue (11.6%) per year is forecasted to grow faster than the Australian market which is growing at a rate of 5.1% per year. The Star remains committed to maintaining a balance sheet that positions the Group for the postCOVID19 recovery. The Star’s business is fundamentally strong, evidenced by the step-up in earnings growth from 1H FY2020 into early 2H FY2020. The long-term value uplift from investments in its network of integrated resorts and continuing operational improvements to drive visitation and earnings remain substantial. Veye recommends a "Buy" on “The Star Entertainment Group Limited” at the current price of $3.70


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