Is Star Entertainment the gamble of a lifetime?

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Is Star Entertainment a bargain in disguise or a sinking ship? The embattled casino operator's financial troubles have sent its share price tumbling, raising serious doubts about its future. But does the current situation reflect the timeless investment principle of buying when others are fearful?

After all, at these price levels, the only way is up, right?

To answer that, let's examine Star's current challenges. Ballooning debt, declining revenue, and mounting regulatory fines are weighing heavily on the company.

star entertainment group

Star itself has warned of "material uncertainty" surrounding its viability. In response, lenders have brought in specialist advisory and restructuring firm McGrath Nicol to explore debt solutions-an unmistakable signal of how close the company is to the brink.

Despite the turmoil, some see opportunity. A recent 5.5% stake purchase by a Macau-based Chinese investor has sparked speculation. The key question now is whether this move represents a calculated bet on Star's recovery or simply a short-term opportunistic play.

Meanwhile, Blackstone's reported interest in acquiring Star's Brisbane casino could offer much-needed financial relief by reducing debt. However, selling off such a valuable asset could hinder long-term growth prospects.

For aspiring investors, Star's situation embodies a classic high-risk, high-reward scenario. The company's future hinges on successfully divesting assets to manage its debt while finding a sustainable path back to profitability.

Turning to the chart, with the share price down more than 95% from its all-time high, the outlook appears bleak. However, if the stock can hold above 10 cents and begin to climb, there may be short-term opportunities. That said, a key level to watch is 60 cents-a critical resistance point since September 2023. A break above this level could signal a potential long-term trend reversal and pave the way for a significant upward move.

Therefore, while a turnaround is possible, investors should be wary of short-term price spikes that can be tempting but often lack follow-through. Patience and discipline are crucial in navigating this part of the market so if you're considering taking a punt on Star, prepare for a wild ride.

What are the best and worst-performing sectors this week?  

The best-performing sectors include Information Technology, up more than 3%, followed by Financials, up more than 2% and Industrials, up more than half a per cent.

The worst-performing sectors include Materials and Energy, both down more than 1%, followed by Consumer Staples, down more than half a per cent.

The best-performing stocks in the ASX top 100 include HUB24 Limited, up more than 15%, followed by Pro Medicus, up more than 8%, and JB Hi-fi, up more than 6%. The worst-performing stocks include Iluka Resources, down more than 14%, followed by Lynas Rare Earths, down more than 5% and Mineral Resources, down more than 4%.

What's next for the Australian stock market?  

The All Ordinaries Index climbed more than 1% this week, reflecting strong buyer dominance. A key focus was the 8600 resistance level, which had previously discouraged buyers in early January. However, with the index closing above this level, buyers have made it clear that the all-time high is now within reach.

This bullish outlook is driven in part by the upcoming reporting season, which typically brings a fresh wave of buying. Investors often position themselves early to maximise potential gains from dividends and franking credits available in March.

On the sector front, Financials and Technology delivered strong gains this week, while Energy and Materials took a breather after their recent rallies. If Financials and Tech continue their momentum next week, and Energy and Materials regain strength, the market could be in for another solid week to close out January.

If that momentum continues, watch for the 9200 level, where fresh selling pressure could emerge. For now, the trend remains strong and stable, making it crucial to stay invested and avoid exiting positions too soon in what has so far been a promising start to 2025.

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Dale Gillham is chief investment analyst at Wealth Within Limited (AFSL 226347). He also serves as the head trainer at the Wealth Within Institute (RTO 21917). He has more than three decades of experience in the investment industry, and is the author of How to Beat the Managed Funds by 20%, Dale's qualifications include an Advanced Diploma and a Diploma of Share Trading and Investment. He co-hosts the Talking Wealth Podcast, and his work has appeared in The Australian Financial Review, New York Business Journal, Wall Street Select and more.