13 June 2024
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Star casinos could become Hard Rock Cafe casinos

Peter Switzer
21 May 2024

The embattled casino business called Star Entertainment saw its share price rocket up 20% yesterday after news was confirmed that the Hard Rock Café business is eyeing off the company. And that’s not the only potential buyer sniffing around this regulator-smashed business.

Anyone who looked at the share price chart of Star Entertainment (the home of a company that straddles ownership and operation of the Treasury Casino & Hotel in Brisbane, The Star Gold Coast and The Star, Sydney) would have to conclude that this mob have put in a shocker.

Star Entertainment Group (SGR)

This was a $5.22 stock in early 2018 and even after the business was devastated by the Coronavirus that killed tourism and big gatherings over 2020 and 2021, it had a $3.76 share price in September 2021.

Since then, it has been a downhill slide driven by official inquiries into bad management practices with criminal implications. CEOs have been shown the door. So have chairmen. And there have been serious questions about whether this listed business would retain its licences to operate its casinos.

Star Entertainment holds three out of Queensland's five casino operation licences and the group also manages the Gold Coast Convention & Exhibition Centre on behalf of the Queensland Government.

Its plight is similar to what Crown Resorts faced after the Bergin inquiry, which found it wasn’t suitable to hold a licence for its Barangaroo facility in Sydney in February 2021. While the Royal Commission into Crown found it was unsuitable to hold a casino licence on the basis that it has engaged in conduct that is “illegal, dishonest, unethical and exploitative”.

Like Star, Crown’s share price plummeted, and the US-based private equity group Blackstone bought the company for $8.9 billion in mid-2022 and shareholders were paid $13.20 cash per share.

Now it looks like Star set to be rescued and the first to put their hand up is Hard Rock Hotels and Resorts, is which has some other investors in a consortium.

The AFR’s Zoe Samiots reported the following about the potential buyers: “Star said it had ‘received inbound interest’ from several parties ‘regarding potential transactions including a consortium of investors which includes the entity Hard Rock Hotels & Resorts (Pacific) ... a local partner of Hard Rock’.”

And the Star name would go to be rebranded as Hard Rock, which is ironically relevant because the Star business is stuck between a rock and a hard place!

By the way, Hard Rock is not just a café business, as this Florida-based group operates more than a dozen casinos including The Mirage in Las Vegas.

All of the Star’s crimes and misdemeanours has resulted in external valuers claiming that the once billion dollar business is now worth around half that and this explains why potential buyers such as Hard Rock would be showing interest in the company.

As I’ve said, the share price rocketed up 20% yesterday but that was only to 54 cents, which is a long way from the $5 plus price this stock was in 2018. This is a good sign that Hard Rock is interested in the business and even after the 20% rise, the share analysis website, FNArena, says the consensus view of Star’s share price suggests a 42.8% upside is possible. In fact, Ord Minnett’s target price of 90 cents implies a 66.67% upside but this, of course, is guesswork. The end result could be more or less, depending on what are the costs for a new buyer to make up for the mistakes of the past management team and board.

The AFR says Hard Rock executives have not only talked to Star stakeholders but also local politicians, which is a good sign that the valuable assets of this business, which incidentally many non-gambling consumers enjoy, will not be lost because of bad management and poor leadership.

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