Star Entertainment Earnings: Remediation and Compliance Costs Are Mounting

We cut our fair value estimate for no-moat Star Entertainment by 25% to AUD 0.90 per share. The reduction to our valuation is based on several factors. First, we now expect VIP earnings to return from fiscal 2026, pushing it out by about a year, and at a lower base. Second, we expect lower long-term profitability for the company as cost cuts have been less effective than expected at offsetting cost-base inflation. Third, the second Bell inquiry raises concerns that the uptick in compliance costs over the last few years has been insufficient to fix Star’s problems, and we expect permanently higher compliance costs.