Galaxy sparks gaming stocks rally after third quarter profit soars 28 per cent to beat estimates

Mass market revenue rises 17 per cent to HK$5.4 billion while VIP revenue falls 4 per cent to HK$6.1 billion

PUBLISHED : Wednesday, 26 October, 2016, 4:31pm
UPDATED : Wednesday, 26 October, 2016, 5:25pm

Macau gaming shares jumped across the board on Wednesday after Galaxy Entertainment’s third quarter earnings topped estimates, with the casino operator reporting a growing number of overnight visitors and virtually full occupancy at its hotels in the world’s gambling hub.

The company, owned by billionaire mogul Lui Che-woo, saw its shares leap as much as 3.8 per cent to top a 14-month high of HK$32.65 in afternoon trading, before easing back to close up 1.91 per cent at HK$32.05.

The results prompted an industry-wide rally in its peers, with MGM China rising 1.37 per cent, Wynn Macau ahead 0.98 per cent, and Sands China ending the day 1.28 per cent up.

Adjust earnings before interests, taxes, depreciation and amortisation, or EBITDA, a crucial gauge on a casino operator’s profitability, soared 28 per cent to HK$2.7 billion from a year earlier, outstripping market estimates of HK$2.52 billion, and up 18 per cent quarter-on-quarter. Revenue rose 5 per cent to HK$12.9 billion.

The gaming giant said hotel occupancy rates at its key properties Galaxy Macau and StarWorld Macau stood at 98 per cent, while Broadway Macau, a family friendly resort, had enjoyed full capacity for the three months ended September 30.

“The recently reported growth in monthly revenue in August and September followed by a strong ‘golden week’ in October are encouraging signs, but we would like some more time before calling it a definitive trend,” the company said in a statement.

Galaxy’s earnings added further cheer to the current bullish mood of Macau casino operators following the openings of Wynn Macau’s multibillion dollar luxury project Wynn Palace in late August and Sands China’s mass-market friendly The Parisian resort.

Analysts had predicted the two attractions would drive up visitor growth to Macau.

We are encouraged by the continuing signs of market stabilisation, yet it remains too early to call it the bottom of the market
Galaxy Entertainment statement

The better-than-expected earnings also cushioned some investor concerns that Galaxy would fall prey to stiffer competition as the new properties tended to grab existing ones’ market share.

“Importantly, visitors who stay overnight generally have a higher spend per customer, with a particular focus on higher margin, non-gaming spend,” the casino operator said.

Macau’s September gaming revenue beat market forecasts, rising two straight month by 7.4 per cent to 18.4 billion patacas. Yet Galaxy believes the market may not have truly bottomed out.

“We are encouraged by the continuing signs of market stabilisation, yet it remains too early to call it the bottom of the market,” the company said.

The former Portuguese colony has been reshaping itself from a gambling hub into a tourist destination offering family friendly entertainment facilities, curbing gaming table quotas granted to concessionaires, and tightening rules on junket operators.

Galaxy said its revenue netted from high-stakes gamblers for third quarter slid four per cent from a year earlier to HK$6.1 billion, while table game revenues contributed by mass market gamblers climbed 17 per cent to HK$5.4 billion.