June 11, 2019 / 12:42 AM / 4 months ago

Australia's Star sees profit down as U.S.-China trade tension shrinks bets

SYDNEY (Reuters) - Australian casino operator Star Entertainment Group Ltd said on Tuesday trade tensions between the United States and China were continuing to hit the confidence of Asian gamblers and its profit, sending its shares down the most since listing.

The warning from the Sydney-listed company demonstrates the far-reaching effects of a long-running dispute between the United States and China with promises of ever more punitive tariffs. The United States has already imposed 25% tariffs on $250 billion worth of goods.

“The very large VIPs continue to travel but they don’t take as many risks as they have in the past,” said Star CEO Matt Bekier in a telephone interview, using the casino industry term for wealthy gambling tourists, typically from Asia.

“The potential trade wars have just created a level of uncertainty and they’re not as aggressive in their outlook as they might have been in the past,” Bekier added.

Star said it expects pre-tax profit of A$550 million to A$560 million ($382.4 million to $389.4 million) for the year to June-end, down from A$568 million for the year ended June 30, 2018.

The company did not give a full-year profit forecast at its half-yearly earnings announcement in February, but analysts had expected the company to report pre-tax profit of about A$602 million, according to the average estimate of 12 analysts polled by Reuters.

Star shares were down 17% in afternoon trading, their biggest one-day decline since the company listed in 2011, and hitting their lowest level in four years. The broader Australian market was up 1.5% at its highest intraday level in 11 years.

“The update from the company has been quite poorly received,” said Steven Daghlian, a market analyst at Commonwealth Securities, which holds Star shares.

Star added that a soft Australian economy and a lower-than-expected rate of house wins had contributed to its forecast of a profit decline.

The company said it hoped to find A$40 million to A$50 million a year of cost savings in the coming months.

Reporting by Byron Kaye in SYDNEY and Mensholong Lepcha in BENGALURU; Editing by Stephen Coates and Christopher Cushing

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