...an underperforming stock that has lost its way typically gets worse with time, as I have said often 'A Dog of a Stock Will Show You More Fleas over Time'.
...now SGR's lifeline is in the hands of its financial backers who may soon run out of patience.
..at 19.5c, it is trading at a market cap of $530mil. Star warns of urgent cash crunch, liquidity pain
Star Entertainment has warned it has just $79 million left in cash – far less than it spent in the past three months – as it struggles to attract customers and cut costs.
The company, in an ASX statement late on Wednesday, said it spent $107 million in the three months to December 31. The company, now led by former Crown Resorts chief executive Steve McCann, warned it was facing challenges fulfilling the conditions of a $100 million loan facility it had lined up.
Star runs casinos in Sydney, Brisbane and on the Gold Coast. Glenn Campbell
Should the company, which runs casinos in Sydney, Brisbane and on the Gold Coast, be unable to access that financing, it would likely face administration. It had already accessed an additional $100 million in debt late last year as it worked to avert collapse.
“The reduction in available cash reflects the continued difficult trading conditions … essential capital expenditure [and] significant items including upfront fees relating to the establishment of the [new loan],” the company said, adding it had also had to pay the first $5 million instalment of a $15 million fine imposed by NSW gaming regulators.
“The group continues to work towards the fulfilment of conditions precedent that must be met in order to draw down the additional $100 million under [the new loan],” it said. “A number of these conditions remain challenging to meet given the group’s current circumstances.”
At a shareholder meeting in November, Mr McCann warned the casino group was battling negative cash flows, asking investors and lenders for patience as he worked to turn around the business. At the time, Star revealed an unaudited earnings before interest and tax loss of $27 million for the first four months of trading in the new financial year.
It is also waiting on an AUSTRAC fine for breaches of counterterrorism and anti-money laundering laws unveiled in a previous independent inquiry, and it will need to refinance $1.6 billion in debt for its new Queen’s Wharf precinct in Brisbane at the end of next year (which it jointly owns with Chow Tai Fook Enterprises and Far East Consortium).
Star has slashed $4.5 billion from the value of its Brisbane, Gold Coast and Sydney casinos over the past two years – a decision that reflects the reduction in patrons visiting venues as operating and compliance costs rise.
The company also said in September it would need a further $357 million over the next two years to complete the Queen’s Wharf project and more money to fund costs associated with operations and maintenance.
Star’s troubles began when it was found to have hidden a criminal gang-linked junket operator and allowed it to operate a secret gambling room. Since then, high-rollers have stayed clear of the company’s casinos and those of its rival, Blackstone-owned Crown. At the same time, Star has had to finance a significant development at its Brisbane casino, which opened late last year.
