Up 23% since May, are investors on the punt with Star Entertainment shares?

Can the new CEO bring the turnaround shareholders are hoping for?

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Shares in The Star Entertainment Group Ltd (ASX: SGR) have been drifting higher lately, rising by 23% since May.

Despite this recent uptick, the company's stock is still down 48% over the past 12 months. It is currently trading at 51 cents per share.

In fact, Star was one of the worst stocks to own in FY24, according to my colleague James.

But its share price has risen from a low of 40 cents on 1 May. So the question is, is there a change in the outlook, or are investors taking a punt on Star Entertainment shares?

Star Entertainment shares up since May

Star Entertainment has faced a tumultuous year marred by regulatory challenges and disappointing financial results.

The NSW Independent Casino Commission's second inquiry into its suitability as a casino operator heavily impacted investor sentiment. This contributed to a sharp decline in the share price earlier in the year.

However, recent management changes and strategic initiatives have sparked a modest recovery in Star Entertainment shares since May.

Steve McCann, the former CEO of Crown Resorts, has taken the helm at Star Entertainment, bringing with him a wealth of experience in turning around troubled businesses. The new CEO's resume includes roles at Lendlease and investment bank ABN AMRO.

McCann's appointment on June 26 looks to have been well-received by the market, with shares up 7.45% since then.

In his first interview as Star's boss, McCann acknowledged the significant challenges ahead but expressed confidence in his ability to steer the company towards recovery.

Speaking to The Australian Financial Review, McCann said he was "very well aware that there are a lot of different outcomes".

But I've always had that work ethic throughout my whole career, and I haven't shied away from a challenge before….

…We've got to succeed, we've got to make the changes we need to make, and we've got to get through them in a timely fashion. We've got to make sure the stakeholders remain supportive and aligned because not all outcomes are rosy, obviously.

Financial performance and outlook

Despite the new CEO's tenure starting this week, the outlook for Star Entertainment shares remains challenging.

In its half-year results, the company revised its profit expectations for FY24 lower, forecasting a significant decline in earnings.

Group revenue for Q4 FY24 is expected to be 4.3% below the previous quarter, driven by continued declines in Premium Gaming Rooms (PGRs) revenue.

Brokers are fairly neutral on the stock too.

According to Commsec, Star Entertainment shares are rated a hold, with just 1 broker rating it a buy.

Foolish takeout

Star Entertainment's journey to recovery is fraught with challenges, from regulatory hurdles to financial instability.

However, the recent leadership changes and strategic initiatives could inject a dose of optimism – at least that's what the market appears to be saying. As always, thorough due diligence and a keen eye on upcoming financial reports and regulatory updates are essential.

Motley Fool contributor Zach Bristow has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. 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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