Star steeled for its own Crown duel with watchdogs as it prepares for a Crown fight with the Star
HONG KONG, Oct 13 (Reuters Breakingviews) - Another Australian casino operator looks set for a fight with watchdogs. A Sunday media report suggested Star Entertainment (SGR.AX) may face a corporate governance crisis similar to Crown Resorts (CWN. AX). Star, on the other hand, is stronger for a scrap than its rival, founded by billionaire James Packer.
The approach of New South Wales Freedom Day on Oct. 11 after a more than three-month lockdown helped Stars stock return to pre-pandemic levels. But allegations that it enabled suspected money laundering and organised crime sent shares down by a quarter by Tuesdays close.
There are enough parallels with the larger Crown Resorts to evoke dj vu. Stars leaders are well-established, with its chief executive and chair both having been directors for a decade. The business hosted international high rollers, clientele who were featured in Crowns compliance lapses and earlier this year regulator Austrac said it was exploring potential problems with anti-money laundering and counter-terrorism financing measures. Like Crown, this occurs just as the firm is developing multi-billion-dollar properties, such as projects on the Gold Coast and Brisbane.
But forewarned is forarmed. It has been two years since similar allegations have engulfed Packers company. Star, which in May made and then two months later withdrawn a bid for Crown, was watching and learning. It responded quickly to this weeks headlines before adding more details to show it is already addressing the watchdog s concerns. After a report prepared for the New South Wales regulator in February recommended prohibiting their cooperation with casinos, the firm cut off work with junket operators, which facilitate travel and credit for VIPs. It has since given up on working with them for an indefinite period. It is also considering cashless payments, which make it simpler to follow the money.
Star can handle tough times, according to Covid. The bottom line turned negative in the year ending June 2020, but the business recovered to report earnings of A$52 million in 2021. It reduced operating costs by 30% compared to 2019, and sold fripperies like a VIP jet and boat to help reduce debt.
Theres no such thing as a safe bet in gambling, and as with Crown, some executives and directors may not be able to keep their posts. Investors with a flair for risk may choose Star instead.
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After the Sydney Morning Herald and 60 Minutes on Oct. 10 jointly released details of a confidential review accusing the casino operator of failing to curb money laundering and fraud, despite warnings to its board, shares in Star Entertainment fell 25% over two trading days, closing at A$3.21 on October 12.
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