12 Oct 2010

Star City - an Asian hub for high-rollers?

by Tony Rein, Andrew Clarke

An additional $285m investment in Star City Casino is intended to turn it into a new Asian hub for high-rollers.

Tabcorp Holdings Limited has announced further investment into Star City Casino. In a move that will add an additional $285 million investment into the casino's redevelopment (taking total capital expenditure to $860 million), Tabcorp's plan is to reinvent the casino as a new Asian hub for high-rollers.

The further $285 million is planned to be invested in:

  • a 400 seat multi-purpose entertainment venue aimed at hosting international acts and conferences;
  • luxury hotel suites, private residences, expanded private gaming room facilities and the purchase of private aircraft - a move aimed at attracting international VIPs to Sydney; and
  • further enhancements to restaurants, customer technology and improved customer arrival experience.

Star City is hoping the $860 million capital investment will revamp the venue with the aim of enabling the venue to become an Asian gambling leader ahead of Melbourne, Singapore and Macau.

While Tabcorp has commended the extra investment in its media release, citing a projected 14.5% return on investment, some commentary has suggested the increased investment exposes Tabcorp to increased "financial and execution risk".

As reported by The Australian, several broking analysts have raised concern about the company's wagering business. With ratings agency Standard & Poor's downgrading Tabcorp's long-term credit rating outlook from "stable" to "negative" on the back of the further investment, it will be interesting to see if Tabcorp's revamp can increase the company's share of the $50 billion Australian VIP gambling market.

 

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Clayton Utz communications are intended to provide commentary and general information. They should not be relied upon as legal advice. Formal legal advice should be sought in particular transactions or on matters of interest arising from this communication. Persons listed may not be admitted in all States and Territories.