Crown Sydney opening could hurt The Star’s profits, analysts say

Analysts at JP Morgan say a slice of The Star Entertainment Group’s premium mass players could migrate to Crown Sydney.

Australia.- The opening of the Crown Sydney gaming floor over 18 months after the launch of non-gaming operations looks set to change the balance of the local casino sector. Macquarie Group Limited expects Crown’s new casino to control 35 per cent of the Sydney table-based gambling market by 2025, worth AU$923m.

That’s likely to affect Crown Resorts’ main rival, The Star Entertainment Group. According to JP Morgan, a worst-case scenario would result in AU$270m being lost to Crown Resorts.

According to the brokerage, The Star has nearly 5,000 players in its top two segments and 15,000 players in its top three segments, including the Chairman and Sovereign levels. Of the total population of the tiered customer base, the Chairman segment includes 900 members, Sovereign 4,500, Oasis 9,000 and Vantage 17,500. Losing all custom from the top three segments would mean a AU$268m loss in revenue.

However, according to the brokerage, since Crown Resorts has only opened its gaming floor to the top two tiers of its membership for now, the likely amount of revenue at risk for The Star is closer to AU$170m.

The Star expects to report revenue of AU$1.53bn for the year ending June 30. It’s sais that slots revenue was up 28 per cent in the June quarter. Non-gaming revenue was up 26 per cent. Domestic revenue up 11 per cent on pre-pandemic levels to AU$512m. Table revenue has not fully recovered but was within 5 per cent of pre-pandemic levels. 

However, the casino operator indicated that full-year results will be negatively affected by the first-half net loss associated with property closures, operating restrictions and border closures as well as expenses associated with regulatory reviews. The Star expects to release its full-year results on August 22.