ustralian casino group Star Entertainment has seen a surprise bump in VIP gambling turnover so far this year, defying expectations that the coronavirus and resulting China travel ban would clear its high-roller tables.
The company, which has casinos in Sydney, Brisbane and the Gold Coast, on Thursday reported a 2.4 percent increase in normalised revenue, including a 2 percent bump in VIP turnover for the six months to December 31.
That is in contrast to its major competitor, James Packer's Crown Resorts, which on Wednesday said its high-roller turnover fell 34 percent in 2019 second half, driving a 5 percent fall in overall revenue amid the fallout from revelations it went into business with "junket" partners with links to organised crime, as reported by The Sydney Morning Herald.
Star Entertainment CEO Matt Bekier said the coronavirus caused a sharp drop in domestic visitors in Sydney of about 20 percent, as people avoided going out amid uncertainty around the infection. Sydney had stayed subdued but business had mostly recovered in Queensland. While the travel shutdown had stopped many Chinese VIP visitors coming to Australia, it had stopped others going home. "They’re still in Australia because they can’t go back," Bekier said. “So we’ve been able to keep these customers, we’ve taken them to multiple properties and we’ve done well in the first six weeks."
VIP turnover was up in the first six weeks of 2020 compared to the same period last year, however, Bekier said comparisons could be difficult because of the short time-frame. Domestic revenue was flat so far this year.
Bekier said the medium-term impact of the virus would depend on how quickly borders open up. While it would put pressure on the international VIP business, which represents 8 percent of its earnings, he was confident the group could cover that by growing its domestic business.
Normalised earnings before interest in the first half of the fiscal year was $3 million ahead of market expectations at $307 million. Macquarie analyst David Fabris said the flat domestic performance so far this year was a "good outcome", given high growth in the prior period, but he forecasts VIP volume will fall 47 percent in the second half.
"VIP remains the moving part given the coronavirus impacts," Fabris said. "[The] impact will depend on the length of the border closures and speed of market recovery."
Normalised net profit after tax - which strips out the impact of lucky or unlucky streaks on the gaming room floor - was 2.1 percent higher at $126 million. Statutory profit was 48.5 percent lower at $77 million, affected by an unusually low win rate and significant items relating to The Star's proposed Ritz-Carlton Sydney development.
Star's shares closed 5 per cent higher at $4.33. Like other China-exposed companies, its shares have fallen sharply amid uncertainty around the coronavirus. Even after Thursday's rally the stock is trading 8 per cent lower since January 16.
Crown Resorts has blamed a 34 percent dive in high-roller turnover on weak market conditions and "negative publicity" stemming from revelations the casino giant it went into business with "junket" tour operators with links to organised crime.
The company, which is 36 percent owned by James Packer, on Wednesday also said its casinos in Melbourne and Perth were being hit by the coronavirus outbreak due to restrictions on travel from China, but did not update the market on the full extent of the impact.
Crown's gambling turnover fell 34 percent to $13 billion, while group-wide normalised revenue was down 5 per cent to $1.4 billion. Using "normalised" figures - which applies a long-term win rate to its gambling turnover, to strip out the impact of lucky or unlucky streaks by its high-stakes customers - Crown reported an 11 percent fall in net profit after tax to $172 million in the six months to December 31.
VIP gambling turnover fell 34 per cent to $13 billion, while group-wide normalised revenue was down 5 percent to $1.4 billion.
Crown's recently installed CEO Ken Barton said in a statement that the result reflected "mixed trading conditions". “VIP program play turnover at our Australian resorts was down... with the business impacted by a continuation of softer market conditions, exacerbated by recent negative publicity," he said.
The Sydney Morning Herald, The Age and 60 Minutes revealed in July that Crown went into business with "junket" operators linked to organised crime as part of its efforts to lure wealthy Chinese VIPs to its casinos.