Fortunes soar in Macau as money rolls in

Macau's soaring casino revenues have brought bumper profits to the city's six licensed gaming companies, and the winning streak shows no sign of cooling.

Three casino companies have already reported first-half results, and this week the others show their cards.

Galaxy Entertainment will be the one to watch. The company on May 15 opened its new flagship property, the HK$15.5 billion, 2,200-room Galaxy Macau resort on the Cotai strip.

In 45 days of operation in the interim period, the property has helped Galaxy leap from No 5 in the market to No 2 (behind SJM Holdings) based on casino revenue.

Investors and analysts will be keen to see how the opening impacted Galaxy's bottom line when it reports earnings on Wednesday.

The company booked earnings before interest, tax, depreciation and amortisation (ebitda) of HK$712 million in the first quarter, a 71 per cent rise from a year ago. However, investors are expecting much more this time. Galaxy's ebitda doubled last year to HK$1.81 billion. Analysts are forecasting the figure for this year to surge by another 135 per cent to HK$4.24 billion, according to Bloomberg estimates.

The market is already pricing in the gains. Despite slumping 25 per cent from a high of HK$21.85 a share on August 1, Galaxy's shares are still up 87 per cent so far this year and have nearly tripled in the past 12 months.

At Friday's closing price of HK$16.48, the stock is trading at 25.4 times this year's forecast of 65 HK cents in adjusted earnings per share.

Sands China and Melco International Development are reporting today, but there is little mystery about how their Macau casinos performed, as their US-listed counterparts - Las Vegas Sands and Melco Crown Entertainment - have already announced their results for the first half.

Sands China, owner of the Venetian, Sands and Four Seasons casino hotels, saw first-half net profit more than double to US$529.5 million, up 114 per cent from US$250.5 million a year ago.

That outpaced revenue growth of 19.7 per cent to US$1.21 billion, according to US stock exchange filings by Las Vegas Sands, owner of 70.3 per cent of Sands China.

Melco International Development also saw strong performance at its 33.36 per cent-owned, Nasdaq-listed casino unit, Melco Crown Entertainment.

A joint venture between Lawrence Ho Yau-lung, the son of Macau gaming magnate Stanley Ho Hung-sun, and Australian billionaire James Packer's Crown Limited, Melco Crown swung to a first-half profit of US$73.9 million from a loss of US$42.6 million a year ago. Revenue at Melco Crown rose 55 per cent in the first half.

Casino revenue surged 45.2 per cent in the first seven months of the year to 148.34 billion patacas - on pace this year to take in more than five times the annual gambling revenues on the Las Vegas Strip.

In the first three weeks of this month, Macau's casino revenue was up 40 per cent from a year ago to 14.8 billion patacas, analysts at Citigroup wrote last week in a research note.