Lucky run and cost cuts bolster Galaxy earnings

PUBLISHED : Friday, 31 July, 2009, 12:00am
UPDATED : Friday, 31 July, 2009, 12:00am

Macau casino operator Galaxy Entertainment Group saw revenue and pre-tax profit rise for the third consecutive quarter, driven by cost cutting and a lucky run on the high-stakes baccarat tables.

The gaming firm saw earnings before interest, tax, depreciation and amortisation (ebitda) at its flagship StarWorld casino hotel climb to HK$214 million in the second quarter, up 91 per cent from a year earlier and 4.9 per cent from the first three months of the year.

Like several other casino firms that have sought to cut costs, Galaxy's bottom line was lifted by an effective 13.3 per cent pay cut for 2,400 gaming staff through an unpaid-leave programme that took effect in February.

In addition, the company benefited from lower interest payments after buying back bonds between January and April, paying 50 cents on the dollar for debt with a face value of US$250 million.

The cost-cutting measures, debt buy-backs and more aggressive recruitment of VIP gambling junkets starting from the fourth quarter of last year combined to help the firm boost profitability while clawing back market share lost to rivals in the world's largest casino market.

Gaming revenue at StarWorld was HK$2.02 billion in the three months to June, up 20.7 per cent from a year earlier and 0.9 per cent from the previous quarter, Galaxy said yesterday in an unaudited earnings statement to the stock exchange.

Galaxy's growth during the period outpaced the overall Macau market, where casino revenue declined 12 per cent from a year earlier and 2.35 per cent from the first quarter.

JP Morgan gaming analyst Billy Ng said StarWorld's performance was partly boosted by a lucky run on the high-stakes tables.

The casino won back a higher than expected 3.2 per cent of its HK$54 billion in VIP wagers, lifting winnings from high rollers to HK$1.73 billion from a restated HK$1.65 billion in the first quarter and a restated HK$1.29 billion a year earlier.

'The higher hold helped. That said, the result is still pretty impressive,' Mr Ng said.

One weak area was the mass market, which entails walk-in cash play rather than high-stakes players brought in by VIP junket agents who typically play on credit. A large section of StarWorld's main casino floor was closed for renovation from May and is set to reopen this weekend.

This led mass-market gaming revenues to fall to a restated HK$187 million in the second quarter, down 29.7 per cent from a year earlier and 26 per cent from the first quarter.

Winning bet

From a year earlier, earnings at the StarWorld casino in Macau grew: 91%