Star Entertainment Gets a Second Chance

The Queensland casino regulator has handed down disciplinary action for Star Entertainment following investigations, finding the firm unsuitable to hold a casino licence in the state. As expected, disciplinary action stopped short of canceling its Queensland licences, which contributed about one third of precoronavirus earnings. We had anticipated Star would be given the opportunity to prove suitability and ultimately continue to operate, mirroring the decision made in New South Wales. Star has been ordered to pay penalties of AUD 100 million, its licence is to be suspended for 90 days (on a deferred basis from December 2023), and a special manager will be installed to oversee operations. Nicholas Weeks, the same special manager appointed to oversee Star Sydney, has been appointed special manager for the Queensland casinos. Star will pay the special manager's costs, but will still continue to receive net earnings from casino operations. The disciplinary actions in Queensland, like New South Wales, are largely as expected, and we make no changes to our AUD 3.90 fair value estimate for shares in no-moat Star.