Galaxy bets on casino openings after slump
Macau gaming firm Galaxy Entertainment Group plans to open three casinos by August after a shake-out in the cut-throat high-roller segment resulted in dismal performance last year.
Turnover from gaming reached $66 million in the five months to December last year, compared with $123.77 million between July 4 and December 31 in the previous year.
The reporting periods differ because Galaxy only completed the acquisition of the casino interests on July 31 last year, paying $18.4 billion for an effective 97.9 per cent stake in the gaming firm controlled by the family of Lui Che-woo and changing its name from KWah Construction Materials.
Galaxy's initial footprint in the Macau gaming market consists of the 63-table casino at the Waldo Hotel, which started operations on July 4, 2004.
Net gaming win before tax and commissions was $1.6 billion for the last five months of the year, down from $2.99 billion previously.
Casino profit slumped to $19 million from $72.76 million.
Despite the less than stellar results, company executives yesterday remained buoyant on the prospects for Macau this year.
Vice-chairman Francis Lui estimated revenues in the overall gaming market could rise 16 per cent to $52 billion.
Overall, the group reported full-year turnover dipped 0.5 per cent to $1.29 billion on the back of solid performance from its construction materials unit.
Net profit soared to $2.39 billion from $55.88 million on non-recurring gains after an accounting measure booked the fair value of the casino interest at a $3.03 million premium to the acquisition cost.
The board did not declare a dividend due to anticipated development costs going forward.
Galaxy plans a massive launch of casino capacity this year that will increase its number of gaming tables eightfold.
In February, the group opened the 90-table Rio Casino to cater mainly to high-rollers, which will be followed by the 146-table Grand Waldo casino on the Cotai strip.
Both casinos will use the same business model as the original Waldo, which relies heavily on subcontractors to secure VIP business and in return pays hefty commissions and a percentage of gaming revenues.
The company's 290-table flagship StarWorld will be fully owned and operated by the group. The resort, which is slated to open in August, includes a 500-room hotel.
Analysts estimated US$20 billion to US$30 billion worth of casino-related projects were in the pipeline for Macau. If all were completed as planned, the amount of hotel space in Macau would rise from 10,000 rooms to approximately 30,000 rooms within the next five years.
