Star Entertainment shares back in green after “damning” QLD report; company dogwhistles court dispute

Despite being slammed by a report from an independent lawyer, supported by QLD’s Attorney General (AG) and thus deemed unfit to operate a Casino in Queensland, Star Entertainment Group’s (ASX:SGR) shares are in the green in late lunch time trades. 

Star Casino currently risks losing its two licences in Queensland attached to two individual casinos. The QLD government has offered Star no sympathy today, with the state Premier joining her AG to suggest laws will be changed to boost financial penalties for casino operators. 

Allegations included in the report state Star has been complicit in money laundering, actively encouraged gamblers banned elsewhere in Australia to participate at its QLD venues, and was marked by a poor corporate culture. 

So far, it’s been a bad run for Star: the same thing happened to them in NSW last month, part of the ‘Bell Review.’ Star’s own dramas follow that of Crown Resorts’ (ASX:CWN) in recent history (Crown is currently not trading.)

For Star group shareholders, as of Thursday afternoon: 

• One year returns are down -43.4%

• Year to date performance down -29.6% 

However, at the same time, shares for the company are in the green at late lunch, up 0.40% to $2.59. 

While that may not be a dramatic display of enthusiasm from optimistic (or stubborn) investors, it is perhaps eyebrow-raising, especially in the dying light of a broad bullish rally early-week. 

“We’re going to court,” put politely 

Star Entertainment has already published its own tempered response to the report, ultimately stating its intention today to go to court. 

Right now, the Office of Liquor and Gaming Regulation (OLGR) must issue Star a “show cause” notice. 

A show cause notice is basically a court summons that requires the relevant party to attend a hearing to, in layman’s terms, provide a ‘please explain.’ 

Star Entertainment today notes it is “currently considering the report and matters raised, and will continue to work cooperatively with the OLGR.” 

It is that last line which is likely giving shareholders a reason for optimism. 

By “cooperatively working” with the OLGR, a body issuing the company a show cause notice, this can only mean the company will attend court. A show cause notice, remember, is effectively a court summons. 

Casinos rarely lose licences

Under state legislation, a formal determination of suitability (or unsuitability) must first be made and sent to Star, but the AG has made it clear that is guaranteed. The government may be able to gazette that as soon as this afternoon.

Worth considering is that Star will attend a hearing already on the backfoot: it is there to answer to allegations put against it in advance; the company does not start the process with court representatives at the beginning of the discovery process. 

Also worth considering is that despite all the grief surrounding Crown, that casino operator was generally just hit with mammoth fines and a lot of finger wagging. In NSW, for instance, Crown did not lose its licence. 

Again, in 2021 in Melbourne, Crown also risked losing its VIC licence, and then did not. 

The recent history of casino regulation in Australia is also likely shoring up support for Star that puts it into the green in early afternoon, though, at an increase of 0.40%, you could safely say a lot of people are still nervous. 

The shape of Star's three month charts