The ASX casino and resort stocks with a first holiday season out of Covid-19 ahead of them

ASX Casino, resort, and entertainment stocks show signs of recovery from Covid-19 challenges
Donaco International share price soars 50% in past month with a stronger FY23 forecast
Embattled Star Entertainment reports some positive news among the bad PR of recent times

The Covid-19 pandemic heavily impacted casino, resort and entertainment stocks with reduced travel and lockdowns. However, the sector has shown signs of bouncing back as restrictions ease and earnings improve.

In positive news for the travel sector, Australia’s flying kangaroo Qantas (ASX:QAN) earlier this month reported it expects underlying profit before tax of between $1.2 to $1.3 billion in H1 FY23, almost as much as the market was assuming they would make for the full year.

And with the peak summer holiday season for Australia and the southern hemisphere fast approaching, casino, resort, and entertainment stocks could get a welcome boost. Here’s a look at some of the ASX stocks in the sector.

Donaco International (ASX:DNA)

DNA has seen its share price soar 50% in the past month as it recovers from challenges from the Covid-19 pandemic.

DNA operates leisure and entertainment businesses across Asia Pacific. Its largest business is the Star Vegas Resort & Club, a casino and hotel complex in Poipet, Cambodia.

Its flagship business is the Aristo International Hotel, a boutique casino in northern Vietnam, located on the border with Yunnan Province, China.

Star Vegas reopened in mid-June after being closed for more than two years due to the Covid-19 pandemic.

In its annual report to shareholders, group CEO Lee Bug Huy said with the reopening of the Cambodia-Thailand land borders in May 2022 it is expected that Star Vegas’ performance will gradually recover in the next financial year.

He said FY22 was another challenging year for DNA with the Covid-19 pandemic.

“Despite that, I’m proud that our group has continued to exhibit financial discipline and tight control measures to preserve Star Vegas, Aristo and shareholder value,” he said.

Star Entertainment Group (ASX:SGR)

There’s no sugar coating for SGR, which has certainly not been shining brightly in 2022. The casino giant has been hit with a string of bad PR, including being found unsuitable to hold casino licences in NSW and Queensland.

Last week NSW’s Independent Casino Commission suspended the group’s licence as well as hit the company with a record $100m fine.

But in what could signal a turnaround in fortunes for embattled SGR, the company announced a first report from its independent monitor Allen & Overy Consulting has suggested it is ready to commence with its remediation program.

While yet to interview new CEO Robbie Cook, who started on October 17, the report authors reckon after talking to other executives and board members they’re confident Star understands the “challenge it faces in remediating the root causes and restoring trust and has shown intention to do so”.

The company’s new CEO Robert Cooke also started in his role this month. The SGR share price is down ~23% year to date but up more than 10% in the past month.

Aquis Entertainment (ASX:AQS)

AQS specialises in developing and operating integrated resorts comprising hotels, convention centres, and other entertainment including restaurants, gaming, shopping, and shows.

Shareholders in September voted overwhelmingly in favour to approve the sale of all the issued share capital in subsidiary Aquis Canberra Pty Ltd – operator of Casino Canberra – for ~$63 million to Iris Capital.

In his address to shareholders at a special meeting to vote on the sale, chairman Russell Shields said the AQS board was giving consideration to how to best use the sale funds.

The AQS share price is down ~12.5% year to date.

SkyCity Entertainment Group (ASX:SKC/NSE:SKC)

SKC is New Zealand’s largest tourism, leisure and entertainment company. The company operates integrated entertainment complexes in New Zealand (in Auckland, Hamilton and Queenstown) and in Adelaide, Australia – each featuring casino gaming facilities and premium restaurants and bars.

FY22 was a tough year for SKC with its revenue falling 32.9% to NZ$639 million and a net loss after tax of NZ$33.6 million. The company put down the poor performance to the impact of Covid-19 disruptions but said it had started FY23 strong and had a positive outlook.

The SKC share price is down 17% year to date but up slightly at 0.4% in the past month.

Ardent Leisure (ASX:ALG)

ALG shareholders in June backed a proposal to sell its US entertainment business Main Event to restaurant and entertainment business Dave & Busters (Nasdaq:PLAY) for US$835m ~A$1.1 billion.

ALG owns and operates a portfolio of assets of entertainment and leisure businesses, including Dreamworld, White Water World and SkyPoint on the Gold Coast.

An accident at Dreamworld in which four people were killed and others injured on the Thunder Rivers Rapids ride in 2016 severely damaged the public perception of ALG.

Furthermore, theme parks were materially impacted throughout the Covid-19 pandemic. However, the company is positioned to capitalise on recovering domestic and international tourism.

ALG reported group operating results improved significantly in FY22, including revenue up 63.2% to $637.6m. However, the share price remains down ~65% year to date.