Star Entertainment Group

Star Entertainment Group (ASX: SGR) is engaged in the business of integrated resorts with gaming, entertainment and hospitality services. The company operates through three segments – (1) The Star Sydney (Sydney) (2) The Star Gold Coast (Gold Coast) and Treasury Brisbane (Brisbane).

Financial Performance:The group’s gross revenue for FY18 grew at 6.1% (pcp) to $ 2,579.5 million, broadly supported by growth in domestic gaming, non-gaming and International VIP rebate business. Looking at the H1 numbers for FY19, Statutory net revenues posted a growth of 14.9% to $1,150 million. Statutory EBITDA growth zoomed to 65.9% (pcp). The company’s results were mainly supported by a high actual win rate in the International VIP Rebate business of 1.62% (highest during 1HFY2014 - 1HFY2019).


1H FY 2019 Key Financials Metrics (Source: Company Reports)

Segment-wise performance: Queensland (Gold Coast and Brisbane):The healthy financials were largely on account of the excellent performance by Queensland (Gold Coast and Brisbane) business where the gross revenue stood at $531.2 million and EBITDA at $160.3 million recorded a pcp growth of 31.3% and 74%, respectively for 1H FY19.

Sydney:In 1H FY 2019, the statutory gross revenue of this business witnessed the fall of 7.3% as compared to pcp, with statutory EBITDA up 59.0% on pcp aided by higher win rate in International VIP Rebate business vs pcp.

The management declared an interim dividend of 10.5 cents (fully franked), up 40% (pcp) which reflects healthy dividend pay-out policy for its shareholders. As on 08 April 2019, the annual dividend yield for the stock stands at 5.61%.

SGR, in the earlier announcement, communicated about the intention of the Queensland Govt to test the market and call for ROI (Registrations of Interest) to develop a GTH (or Global Tourism Hub) on the Gold Coast.

What to Expect: Strong momentum in revenue growth in 1H FY19 is expected to persist in the second half of FY19. Going forward, Capex target for FY19 stands at $ 300-350 million.Also, the group contributed $41 million to the joint venture projects, with no change to the $100 million-$125 million expected for FY2019. The management remains focussed on improving earnings, de-risk growth, delivering on the next stage of capital plans etc.
 
Stock Recommendation: At CMP of $4.240, stock is trading at P/E multiple of 14.110x with market cap at $3.84 billion. The company’s price to book multiple stood at 1.0x, which is quite lower than the industry average of 3.1x.Currently, stock is trading near its 52-week low which is $ 4.070 per share.

Considering the strong fundamentals, healthy financials, expected achievable targets for FY19, we see the share of SGR as a good buying opportunity and maintain “Buy” recommendation on the stock at the current market price of $ 4.240 per share (up 1.193% on April 8, 2019).   
 

Disclaimer
 
The advice given by Kalkine Pty Ltd and provided on this website is general information only and it does not take into account your investment objectives, financial situation or needs. You should therefore consider whether the advice is appropriate to your investment objectives, financial situation and needs before acting upon it. You should seek advice from a financial adviser, stockbroker or other professional (including taxation and legal advice) as necessary before acting on any advice. Not all investments are appropriate for all people. Kalkine.com.au and associated pages are published by Kalkine Pty Ltd ABN 34 154 808 312 (Australian Financial Services License Number 425376). The information on this website has been prepared from a wide variety of sources, which Kalkine Pty Ltd, to the best of its knowledge and belief, considers accurate. You should make your own enquiries about any investments and we strongly suggest you seek advice before acting upon any recommendation. Kalkine Pty Ltd has made every effort to ensure the reliability of information contained in its newsletters and websites. All information represents our views at the date of publication and may change without notice. To the extent permitted by law, Kalkine Pty Ltd excludes all liability for any loss or damage arising from the use of this website and any information published (including any indirect or consequential loss, any data loss or data corruption). If the law prohibits this exclusion, Kalkine Pty Ltd hereby limits its liability, to the extent permitted by law to the resupply of services. There may be a product disclosure statement or other offer document for the securities and financial products we write about in Kalkine Reports. You should obtain a copy of the product disclosure statement or offer document before making any decision about whether to acquire the security or product. The link to our Terms & Conditions has been provided please go through them and also have a read of the Financial Services Guide. On the date of publishing this report (mentioned on the website), employees and/or associates of Kalkine Pty Ltd do not hold positions in any of the stocks covered on the website. These stocks can change any time and readers of the reports should not consider these stocks as advice or recommendations.