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2020 has been a tough year for the Star Entertainment Group Ltd (ASX: SGR) share price. Shares in the Aussie wagering group are down 32.4% as concerns over the coronavirus pandemic have spooked investors.
However, the Star Entertainment share price jumped 6.1% higher in yesterday’s trade to close at $3.15 per share. Here’s why this could be the start of a good run for the Aussie casino company.
Why the Star Entertainment share price can surge in 2021
Star owns and operates a number of casinos across Sydney, Brisbane and the Gold Coast. Earnings have slumped in 2020 as many of those venues have been forced to shut their doors.
On top of state-based restrictions, both domestic and international borders remain shut. That’s not good news for the casino industry which often relies on high-rolling international visitors to bring in the big bucks.
However, the Star Entertainment share price surged higher yesterday as some optimism returned to the market. On top of that, an article in the Australian Financial Review (AFR) noted Macquarie Group Ltd (ASX: MQG) has tipped Star as a potential outperformer in 2021.
Macquarie suggests that Star could benefit from the next phase of the pandemic recovery. Star is potentially a big winner from any successful vaccine in the form of higher foot traffic and earnings.
Importantly, Star now has exclusivity over the NSW poker machine market for casinos for the next 20 years following recent negotiations.
Fellow rivals like Crown Resorts Ltd (ASX: CWN) and SKYCITY Entertainment Group Limited (ASX: SKC) have also seen their values fall.
Is now the time to buy?
I think there’s little doubt that the Star Entertainment share price is a speculative buy right now.
Much of the next 12-18 months of share market performance relies on the vaccine success and economic recovery.
If we see a successful vaccine candidate in early 2021, I think Star Entertainment is one ASX share to put back in the buy zone.
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Motley Fool contributor Ken Hall has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Crown Resorts Limited and Sky City Entertainment Group Ltd. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.
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