Angus Hewitt: The main concern is the second inquiry into Star's suitability to hold a casino license in New South Wales, and that will be chaired again by Adam Bell. The New South Wales regulator isn't confident in handing back the license by the time the special manager's tenure ends in the end of June. In their own words, they're not convinced that Star can prove suitable to hold a casino license or is able to prove suitable to hold a casino license in New South Wales. This is a pretty big concern. There's been a big uptick in compliance costs, and it doesn't look like it's enough to fix Star's problems. As a result, we think the risk of having to shut the doors at the Star Sydney, whether that's through suspension or cancellation, has risen, leading to our extreme uncertainty rating.

We see four broad outcomes. One, Star is found suitable and regains its casino license. Two, the special manager's tenure is extended. Three, the license remains suspended, but there is no longer a special manager. And four, the license is cancelled. We think the special manager is unlikely to be extended. It will be the end of a 20-month tenure by the end of June. So, we think it's pretty unlikely, and we think that's the reason for this inquiry, which really leads us to an almost binary outcome. Either the Star Sydney closes its doors at the end of June, or it doesn't. A temporary suspension of the license would be costly. A cancellation would be catastrophic. We think Star will continue to operate the casino license, but the chance of it having to close is what leads to that extreme uncertainty rating.

The casino sector is in a really tough spot at the moment. Beyond just the regulatory headwinds, we've got cost of living pressures weighing on discretionary spending in general. So, we're seeing main-floor gaming really get squeezed and particularly gaming machines as well. But we think pessimism is a bit overblown at the New Zealand casino operator, SkyCity. Yes, they have regulatory headwinds. Yes, the discretionary environment is weighing on earnings. But we think the regulatory environment isn't as difficult as it is for Star. So, we have a high uncertainty rating for SkyCity. And we think the market is overly concerned with regulatory headwinds in New Zealand and in Adelaide and overly concerned with the near-term discretionary environment, overlooking the strong earnings potential as it recovers from cyclical lows and really the strength, the competitive strength of the Auckland casino, which underpins SkyCity's narrow economic moat.