Galaxy Entertainment Group

Galaxy shines from high-stakes play

Macau casino operator reports 29 per cent jump in first-quarter profit as VIP gamblers return

PUBLISHED : Thursday, 16 May, 2013, 12:00am
UPDATED : Thursday, 16 May, 2013, 3:53am

Macau casino operator Galaxy Entertainment posted a 29 per cent increase in first-quarter earnings and said it was seeing signs of improved demand from high-stakes gamblers.

Adjusted earnings before interest, taxes, depreciation and amortisation for the quarter to March rose to HK$2.77 billion from HK$2.15 billion a year ago, Galaxy said in a statement. The median estimate of six analysts was HK$2.79 billion.

A rise in new attractions, hotel supply and an improved rail connection are drawing more mainland visitors to Macau, the world's biggest gaming hub.

Galaxy is expanding in the city's Cotai area to compete with rivals including Sands China, where first-quarter profit jumped 63 per cent.

"There have been positive signs that demand in the VIP segment is regaining momentum," Galaxy said, referring to the high-stakes gamblers who provide most of Macau's revenue. VIP gamblers curbed spending last year as the mainland's economy weakened.

Revenue climbed 15 per cent to HK$15.2 billion. Turnover for VIP gambling fell 2 per cent at the Galaxy Macau and 15 per cent at Starworld Hotel & Casino.

Galaxy said last week it would pay HK$3.25 billion for Grand Waldo, which includes a spa, casino and hotel, to increase its footprint on Cotai. It is also investing as much as HK$66 billion to build the second and third phases of Galaxy Macau, its flagship casino resort in Cotai that opened in May 2011.

Gross gaming revenue in Macau is expected to grow 17 per cent to US$44.5 billion from US$38 billion last year, according to Deutsche Bank estimates.

Galaxy shares, which have gained 82 per cent over the past 12 months, rose 0.52 per cent to close at HK$38.50 yesterday, in line with the benchmark Hang Seng Index.

Karen Tang, a gaming analyst at Deutsche Bank, is raising the price target on the stock to HK$46.10 from HK$38.30 as the gaming operator is on track to open another integrated outlet in 2015, which should boost its revenues and earnings.

Galaxy is investing about HK$16 billion in the second phase to almost double the size of its Cotai resort as it competes with Sands and Melco Crown Entertainment. The expansion, which the company has started, will add as many as 500 gaming tables and 1,300 rooms from the JW Marriott and Ritz-Carlton hotels by 2015.

Galaxy is also planning to spend up to HK$50 billion to begin the third phase of expansion at the end of this year or the beginning of next.

The company had received approval from the government to add 50 tables this year, deputy chairman Francis Lui Yiu-tung said in March.

Galaxy faces competition from Sands China and Melco Crown as it expands in the Cotai area.

All three companies as well as Wynn Macau and MGM China are building new resorts in the area.

Sands received approval in January to add 200 additional gambling tables. Its latest resort, Sands Cotai Central, was opened in April last year. The company is investing US$2.8 billion to build its fifth on Cotai.