Australian casino heavyweight Star Entertainment Group warned of severe financial strain on Thursday, revealing dwindling cash reserves and intensifying concerns about its viability. Shares of the company plunged 28% following a fourth-quarter update that highlighted a steep decline in liquidity and mounting operational challenges.
Star reported having just A$79 million (US$49 million) in available funds at the end of 2024, down from A$186 million three months earlier, after burning through A$107 million in cash. The company’s market valuation has plummeted to A$415 million ($257 million), a sharp decline from over A$3 billion before a regulatory inquiry in 2022.
The casino operator is exploring options to improve liquidity, including accessing an additional A$100 million loan. However, this is contingent on raising A$150 million in working capital, a goal the company admits is "challenging" under current circumstances.
Star’s financial woes stem from a bruising regulatory investigation in 2022 that uncovered money laundering and criminal infiltration tied to the Macau-based junket operator Suncity. The inquiry revealed illegal activities, including an off-site VIP room and cash exchanges using sports bags, leading to regulatory penalties and a loss of lucrative junket revenue.
Adding to its challenges, Australia’s cost of living crisis has dented domestic gambling revenue. Increased competition from “pokies” and online sports betting has further eroded Star’s market share.
Star’s struggles reflect broader headwinds facing the Australian casino sector. Rival Crown Resorts, which was acquired by private equity firm Blackstone in 2022 after similar compliance failures, has also seen declining profits and workforce reductions.
Star is now working with UBS to secure a partner to bolster its financial position, though analysts remain skeptical about a near-term turnaround.
Kai Erman, an analyst at Jefferies, warned of “extremely difficult” trading conditions for Star, compounded by stricter gambling regulations set to take effect in its key markets.
“The chips are down for Star,” Erman said in a note, emphasizing the lack of catalysts for improved earnings and the challenges in accessing much-needed capital.
