Shares in the operator of the Sydney, Brisbane and Gold Coast casinos, Star Entertainment Group Ltd (ASX: SGR) have risen after the company released a strong set of interim results for the half-year ending December 31.
Here are the highlights from the interim financial report:
- Domestic tables revenue up 12.3%
- Slot machine revenue up 7.4%
- International VIP Rebate business volume was solid but on a poor actual win rate. Turnover increased 1.5% to $23.6 billion. Normalised revenue was up 1.7% to $338 million with the actual win rate falling significantly to 0.88% compared with the prior period's actual win rate of 1.33%
- Normalised gross revenue came in at $1.16 billion, a gain of 6.7% on the prior corresponding period
- Normalised earnings before interest, tax, depreciation and amortisation grew 18.6% to $310 million
- Normalised net profit after tax increased 26.1% to $142 million (normalised results are adjusted using average win rates)
- A fully franked dividend of 5.5 cps declared which is half a cent higher than last year's interim distribution. The stock will trade ex-dividend February 19 with payment on March 22.
Setting a trend…
The solid results from Star Entertainment arguably bode well for peers when they report. Investors will be keen to compare the results with fellow casino operator Crown Resorts Ltd (ASX: CWN) as well as slot machine manufacturer Aristocrat Leisure Limited (ASX: ALL).
Outlook
Shareholders in Star Entertainment will be closely watching the performance of the International VIP business going forward as this was the major area of concern contained within the interim results.
Management noted that as a result of two years of below average returns from this business segment, the average win rate will now be adjusted down to 1.35% from 1.45% for the 2016 full year results.
With major developments underway at all three casino operations, there is significant capital expenditure budgeted for over the next few years. While this will no doubt affect the bottom line in the near term, long-term investors will be analysing the potential for the group to produce meaningfully higher profits in the longer term.
