Mainland gamblers, new casino underpin solid profit rise at Galaxy
Macau casino operator Galaxy Entertainment, posted a forecast-beating nine-fold rise in half-year net profit, boosted by a new casino and a steady flow of Chinese visitors keen to try their luck in the world’s largest gambling destination.
Although China’s economic slowdown is threatening to rein in the flow of visitors that made Macau one of the fast-growing economies in 2011, Galaxy is seen as better placed to weather any drop-off as it owns the newest resort on Macau’s glitzy Cotai casino strip.
Galaxy, a US$12 billion company controlled by Hong Kong property and construction tycoon Lui Che Woo and 13 per cent owned by European private equity firm Permira, reported net profit of HK$3.45 billion (US$445 million) for the first six months of the year.
That was up from HK$378.3 million in the same period a year ago and above an average forecast of HK$2.8 billion from 5 analysts polled by Reuters.
With gambling revenues still rising, albeit at a much slower pace, and armed with the biggest piece of property on Macau’s Cotai strip, Galaxy is now investing $2 billion in the second phase of its new Galaxy Macau resort which opened last year.
The new phase will double Galaxy’s size on Cotai at a time when rivals such as Sheldon Adelson’s Sands China are also building new properties.
Macau, the only place in China where Chinese nationals can legally gamble in casinos, relies on the big-spending VIP punters for more than 70 per cent of gambling revenue and this segment has been hit particularly hard by China’s economic slowdown.
Increased growth for the ordinary gambler segment is, however, helping to the cushion the blow and keep overall revenues on an upward trend.
Galaxy’s shares have risen almost 60 per cent in the year to date, outperforming the benchmark Hang Seng Index which has climbed 8 per cent in the same period.