By Joshua Peach
One of Star Entertainment’s largest shareholders, Wilson Asset Management, is pushing for the embattled casino operator to sell more assets as the fund manager attempts to recoup tens of millions of dollars of losses.
Portfolio managers of the $1.9 billion WAM Leaders Fund, Matthew Haupt and John Ayoub, told investors last week that they had “got the call wrong” when they heavily invested in Star last year.
“Sometimes we play with fire, and when we play with fire occasionally we get burnt,” Mr Ayoub said, naming Star as one of two stocks that hit the fund’s performance last year. “We got that one wrong, but the journey isn’t quite over.”
They also backed troubled glass bottles and cans maker Orora, which last year bought France’s Saverglass from the Carlyle Group for a massive $2.2 billion.
Star, which operates casinos in Sydney, Brisbane, and the Gold Coast, went into a trading halt at the start of the month after it failed to publish its accounts as required by the ASX. It also followed a scathing report, authored by Adam Bell, SC, into its ability to run the Sydney casino precinct.
WAM Leaders is among the largest backers of Star, reportedly holding north of 4 per cent. That places it behind wealth giant Perpetual and billionaire businessman Bruce Mathieson.
By June last year, more than 5 per cent of WAM Leaders was invested in the casino operator when the shares were still trading above $1 a piece. Based on the fund’s net tangible assets disclosed at the time, that amounted to an around $75 million bet. Today, that stake would be worth less than half that amount. The shares last traded at 45¢ before its halt at the start of the month.
The heavy sell-off in the shares coincided with Star reportedly preparing to announce a $1.4 billion write-down of its casino assets and a major cost-cutting program. The company remains locked in talks with banks, lenders and investors as it scrambles to shore up its financial position, following a cost blow-out at its Queen’s Wharf project in Brisbane and a rapid deterioration in revenue.
‘Every single asset is for sale’
As part of the effort to shore up its funds, Star Entertainment sold its former Treasury Casino property in Brisbane. The WAM Leader managers welcomed the sale but said they intended to push for more.
“There are no sacred cows any more,” Mr Ayoub said. “For us, every single asset is for sale, and it’s time to return cash back to shareholders in one form or another.”
“There are a number of assets that are non-core and saleable to help the strategic direction of the business … It’s going to test our investment case if we can realise the value of those assets and that’s something that we will certainly be agitating for.”
Mr Haupt admitted that successfully backing Crown Resorts’ $8.9 billion buyout from New York-based investment giant Blackstone in 2022 had impacted his judgement.
“Looking at what we got wrong, we had a really good experience with Crown and Blackstone and were essentially somewhat biased or blinded by the success of that investment,” he said.
“What we got absolutely wrong [with Star] was the deterioration in earnings and the amount of capital that was required – from a regulatory standpoint – to ensure that they are now the cleanest game operating in the country, and the capital that was required to build Queen’s Wharf.”
The pair backed Star’s new chief executive Steve McCann, who took over in July after Robbie Cooke’s resignation in March before the second inquiry into the group’s Sydney casino operations had started.
“Steve McCann is absolutely the right person to turn this ship around,” Mr Ayoub said. “Once Steve does what he needs to do … we think the business will be better positioned coming out the other side.”
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