Star Entertainment Group Limited (ASX SGR) released an update on the expected FY2019 earnings today. The SGR share price crashed by more than 16% off the back of the news.
Star Entertainment Group announced a slowdown in the domestic growth for the second half of the financial year 2019, year-to-date, compared to the same period in the previous fiscal year. However, the international VIP trends remained the same, and many capital developments are ongoing as planned.
About Star Entertainment Group Limited
(ASX SGR) is one of the leading entertainment and gaming companies in Australia. Currently, the company owns and operates The Star Sydney, The Star Gold Coast, and Treasury Brisbane. It also owns Sheraton Grand Mirage in a joint venture and operates the Gold Coast Convention and Exhibition Centre on behalf of the government of Queensland.
Star Entertainment Group has an extensive portfolio of tourism, gaming, and entertainment assets and is growing steadily in association with its partners. The company has won several prestigious awards in the domains of tourism, hotel accommodation, and sustainability.
Trading and Earnings Update
Star Entertainment Group today that the growth of its domestic revenues across all of its properties has softened since the end of the first half of the financial year 2019. Year-to-date, the domestic revenues have gone up by only 0.3% compared to the same period in the prior fiscal year.
The slow domestic growth can be attributed to difficult macro-economic conditions, lower hold rates on table games in private gaming rooms, and disruption in the services at The Star Sydney due to capital works.
On the other hand, international VIP trends have remained the same as compared to the first half of 2019. Overall, based on the updates, the EBITDA for the full financial year 2019 is expected to be between AUD 550 million and AUD 560 million.
Additionally, the company also reported that it is going forth with its cost management initiatives that are aimed at cost savings of AUD 40-50 million. The capital development projects of The Star Entertainment Group are progressing as planned.
The excavation at Queen’s Wharf Brisbane is expected to complete as planned in July 2019, and the completion of the first joint venture tower, The Star Gold Coast, is expected to finish in the financial year 2022.
Financial Position of Star Entertainment Group
Star Entertainment is relatively cheap compared to the industry.
However, the company has a steady increase in total revenue, gross profit, operating income, and net income over the past three years.
Although the domestic revenues of The Star Entertainment Group have not grown as high as expected, the growth is still positive. Year-to-date, the domestic revenues have increased by 3.1% for the financial year 2019 compared to the previous comparable period.
Fundamentally, SGR has a strong balance sheet and a proven history of excellent performance. Even though the SGR share price was sold off today, the future of the company still looks positive.
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