Why Star’s mystery Macau backer is betting big on the casino operator

A secretive investor is friends with Star’s two Hong Kong-based partners, sources say, which could give gaming regulators a new headache if he keeps buying up shares.

The under pressure Star Entertainment has seen a mystery investor enter the fray. Picture: NewsWire/Glenn Campbell

A mysterious Macau investor with millions available to bet has delivered a late twist to the slow-moving drama that has become Star Entertainment.

Macau’s Xingchun Wang is now the second-biggest shareholder in Star, although the embattled casino operator and its bankers are in the dark about who he is and what his intentions are.

The secretive Wang has spent a little over $38m amassing a 6.5 per cent stake in the troubled Star. He quietly started his buying spree last September through his bank, HSBC.

Buying has picked up again since Christmas and into the New Year, including another $4.5m worth of shares this week. The collapse in Star’s shares since it warned new cashless gaming rules were hurting its business means Wang is deeply out of pocket – at least on paper However, that hasn’t deterred him from betting big.

Wang’s late entry onto the Star registry is set to give gaming regulators a new headache, particularly with Star now only being kept alive by the support of its bankers.

That headache becomes even more real if Wang keeps buying and hits the trigger required for anyone wanting to invest more than 10 per cent in a casino under NSW’s rules to face a probity check. It is unlikely Wang is sitting waiting to take a call from NSW’s combative casino regulator.

Star might be in the dark, but well-placed Macau gaming sources have suggested Wang is a known friend of Star’s Hong Kong-based partners in the massive Queens Wharf venture in Brisbane.

Wang’s buying comes as just Star’s chief executive Steve McCann is expected to meet with the two Queensland Wharf partners in coming weeks, giving the three much to discuss.

Star’s new investor is based in the casino haven of Macau.

Wang has previous form in making secretive and sporadic investments, with links to a string of shelf companies registered to serviced offices in Hong Kong with these companies in turn taking small stakes across coal, transport and chemicals businesses.

Wang has listed his address in a massive apartment complex in Macau’s newer suburbs. Remember casinos represent Macau’s single biggest source of revenue. Multiple attempts to contact Wang have been unsuccessful.

Bankers suggest Wang’s voting stake could be exercised as a block with Star’s joint venture partners the Hong Kong-based gaming interest Chow Tai Fook Enterprises and listed property developer Far East Consortium. Both Hong Kong Companies currently hold 6.33 per cent stake in Star, just under the 10 per cent threshold before probity checks get underway.

With Wang’s holding this combined stake could be as much as 19.2 per cent, which is more than enough for a blocking stake or at least gives them a say in the event of an opportunistic takeover of Star while it struggles with a serious cashflow crunch. They could also call an extraordinary general meeting or stare down a dilutive cash raising to a new shareholder.

Several years ago, Chow Tai Fook eyed as much as 25 per cent stake in Star, although is thought to have gone cool over the deal. NSW’s chief casino regulator Philip Crawford has previously said Chow Tai Fook had approached the regulator in 2020 to increase their stake but nothing eventuated. A long-running investigation by the Queensland gaming regulator into Chow Tai Fook last year cleared the Hong Kong conglomerate as a suitable partner.

Billionaire Bruce Mathieson has the biggest single holding in Star with a 9.6 per cent stake and remains keen on buying Star’s well-regarded Gold Coast casino.

Perpetual, who was thought to have been aligned with Mathieson sold down its 8.8 per cent equity stake last November and is now no longer a substantial holder. Even so, Perpetual is a member of a lending consortium, giving it a bigger say if Star is forced to place itself into administration.

That’s the risk for the equity investors, they stand to lose it all if Star folds. Then it's the bankers calling the shots.

Saving star

The twists and turns across Star’s share registry remain a sideshow in comparison to the bigger battle Star faces as a new management led by former Crown boss Steve McCann tries to secure the casino’s very survival.

With this McCann faces a major balancing act between all stakeholders from government to banks and Star’s own staff to protect the business and employees. He conceded this is “complicated” and will take time.

“The Star is continuing to explore all viable options to strengthen our financial position,” McCann said on Tuesday. “The Star is seeking time to reset the business”.

Star is burning cash at a rapid rate with current projections giving it just months before it runs out of money. The NSW government’s determination to push ahead with tough gaming rules including mandatory cashless gaming has slashed revenue and is quickly choking off essential cash needed to keep the casino running.

New Star Entertainment chief executive Steve McCann

Much focus is around the introduction of the $5000 daily limit for patrons. This daily limit then drops to $1000 from August which Star’s bankers fear will be another hit to revenue.

At the same time it is caught in a cost bind with the obligation to protect 3000 jobs in Sydney until the end of the decade in order to escape what would have been an even harsher round of NSW casino taxes.

A spokesman for NSW gaming minister David Harris tells The Australian: “It is the responsibility of The Star to maintain the financial viability of its business”.

“The NSW Government continues to monitor the situation at The Star,” the spokesman says, adding the jobs guarantee remains in place and has not been breached.

Star too has a number of costly unknowns ahead of it with fines and penalties. The NSW government’s casino regulator late last year issued a $15m fine for Star going too slow on cultural overhaul – according to the findings of second Bell inquiry. Star is paying this across three instalments, the first $5m has been paid with the next instalment due by the end of March. Then there’s a looming penalty to be thrashed out with financial crimes regulator Austrac. This could be more than a hundred of millions but with its current cash reserves, Star could struggle to pay the full among.

Compounding all this is the $150m in subordinated debt needed to be raised as a condition to secure further finance from its banks for another $100m. The window for this raising is rapidly closing. So too are Star’s options.

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