Packer Decision To Sell Was Right As Austalian VIP Gambling Declines

Packer Decision To Sell Was Right As Austalian VIP Gambling Declines June 12, 2019 June 12, 2019 David Walker
 Australia June 12, 2019 by David Walker

Now that recent reports have confirmed that VIP spending in the Australian casino market is in a free fall, it confirms that billionaire and former Crown Resorts chairman James Packer’s decision to sell his shares in one of the country’s largest gaming companies a few weeks ago has proven prophetic.

The Star Entertainment Group which is the biggest competitor to Crown Resorts in Australia caught plenty of investors off guard recently as it revealed that VIP casino spending in the country has plummeted by 31 percent in the first six months of this year.

Packer sold 19.9 percent, nearly half his stake, in Australia’s Crown Resorts at a loss in late May 2019 for $1.76 billion, effectively handing over the reins of the company to the Hong Kong-based entertainment conglomerate Melco Resorts which is chaired by Lawrence Ho.

The $13 a share sell down perplexed many market analysts as it was well below the $14.75 per share bid offered by Wynn Resorts, the world’s No. 2 casino operator, for Crown Resorts earlier this year, and only marginally above the gambling firm’s trading price. Wynn had scrapped its bid in April 2019 after details of the deal were leaked to the media. Crown shares have since sunk to $12.11.

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Explaining his decision to sell off Crown shares, the Australian billionaire had said he was looking to diversify his portfolio and invest more funds elsewhere, albeit not specifying which industries he intended to venture into.

The sell down of Crown Resorts and free fall of Star Entertainment has fanned fears that other gambling entities may be facing similar financial woes and may be in danger of losing investors as well. One of these casino operators is ASX-listed SKYCITY Entertainment.

Star Entertainment estimates that its full-year mid-range earnings before interest tax depreciation and amortization (EBITDA) may round out to around $555 million in 2019, well below the $600-million forecast of analysts at the start of the year and around 2.3 percent below 2018.

Star chief executive Matt Bekier attributes the VIP gambling slowdown to disinterest from Asian players, particularly the Chinese market.

Australia VIP Gambling Shares Crash

Credit Suisse remarked that Crown Resorts was being weighed down by economic issues in a reported dated May 31. With the gambling corporation set to open its largest VIP only casino property in Sydney in 2021, Crown will need to cope with the cool down in the coming months.

Star Entertainment’s market prices were significantly hit this week due these reports which saw its stock nose-diving 16 percent.  

David WalkerAuthor

David is our resident 'down under' contributor, letting us know what is going on in the southern hemisphere, he is also keen blackjack player