Market watchers would have been looking at the financial results of The Star Entertainment Group on Thursday as an indicator of what's in store for James Packer's rival casino operation, Crown, following the arrest of its employees in China last October. The news was not good.
Turnover at The Star group's VIP business plunged 27 per cent in November and December, following the arrests.
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James Packer returns to Crown board
A management shake-up at Crown Resorts, after a horror run in 2016, could leave investors a little confused.
Crown Resorts shares slumped 14 per cent in a single day last October when it emerged 18 of its employees were detained in a police sting covering several Chinese cities targeting allegedly illegal marketing of gambling junkets. It later revealed that VIP turnover had plunged by 45 per cent over the first 23 weeks of the December half.
The Star managed to post an incredibly strong result for the December half year, but only because it got lucky against the VIP high rollers that did show up to its gaming tables.
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The Star boss, Matt Bekier, spoke of how the gaming operator went from a "freakishly bad" win rate against its high rollers previous to year to a freakishly good one last year.
But after normalising its financial performance - to remove the effect of its good luck against its gambling clients - revenue and earnings were both down. This includes gambling volumes from its VIP business "following the detention of Crown Resorts employees in China in October 2016."
Bekier said it is driving the group strategy to diversify its client base away from the North Asia market.
"We are executing against our strategy of diversifying our international revenues, including the south-east Asia VIP and Asian premium mass (market). We continue to assess the north Asian VIP business as the China situation develops," said Bekier.
He emphasised to analysts how careful the company has become when it comes to the Chinese high rollers.
"We obviously want to be cautious because we don't have all the facts on the table now."
"At this point we are not taking any risks" and said the casino operator is "not responding to customers we don't know."
The stock rose after the market warmed to the strong top line numbers and another increase in its dividend.
Group revenue increased 11 per cent to $1.23 billion, and statutory net profit was up more than 135 per cent to $141.8 million, driven largely by a near doubling in The Star's win rate against its VIP gamblers from 0.88 per cent to 1.62 per cent.
It's not the sort of luck which will hold, but Bekier assured analysts the results so far this year indicate the "satisfactory growth" so far this year despite continuing disruption from its multi billion dollar refurbishment and development pipeline in Sydney and Queensland.
And while volumes from its VIP business continue to be impacted from the "trends" from late last year, the company said, but gross revenue from the remaining business increased by double digit levels compared to the prior December half.
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