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Galaxy Entertainment profit down 60.2 percent in 2015

Hong Kong-listed Galaxy Entertainment Group Ltd reported a profit of HK$4.1 billion (US$531.1 million), down 60.2 percent for the year ended Dec. 31, 2015.

Group revenue for the year fell 29 percent to HK$51 billion from HK$71.8 billion in 2014, and adjusted EBITDA was HK$8.7 billion, down 34 percent year on year.

However, figures for the fourth quarter improved and beat analyst estimates. Fourth quarter group adjusted EBITDA was up 18 percent compared to the previous quarter, and decreased 7 percent compared to 2014.

The Macau operator said its Galaxy Macau operating profit improved quarter on quarter with the ramp up of Galaxy Phase II. Fourth quarter adjusted EBITDA was up 21 percent to HK$2 billion compared to the previous quarter.

StarWorld Macau was said to be successfully transitioning to the mass market, reporting adjusted EBITDA of HK$557 million, up 8 percent sequentially, and down 14 percent year-on-year.

Broadway Macau reported a near 100 percent occupancy rate, with revenue for seven months at HK$425 million and an adjusted EBITDA of HK$(7) million.

The operator says its Galaxy Macau Phase II development saw some cost savings of around HK$400-HK$500 million, whilst Cotai phases 3 & 4 are expected to commence in 2016. Its plans to develop a resort in Hengqin are also moving forward, according to the report.

UBS analysts expects investors to react well to the results, with reported EBITDA up 5 percent from consensus. UBS notes mass & slot revenue at Galaxy Macau grew 6.5 percent quarter-on-quarter vs UBS’ previous estimates of 7 percent. Retail revenue was also impressive, at HK$269m in Q415 compared to HK$236m from the previous quarter.

Galaxy Entertainment Group chairman Dr. Lui Che Woo said he was cautiously optimistic of the Macau gaming market in the medium and long term. “While it is too early to call a bottom to the market especially given the current volatile macro economic environment, sequential growth in Macau’s gaming revenue in the final quarter of 2015, coupled with healthy visitor numbers over the important 2016 Chinese New Year period, potentially signal market stabilization,” the chairman said.

Berstein analysts say Galaxy's fourth quarter results were better than expected, with improving ramp up in Galaxy Macau Phase 2, stabilization in Mass market and shift of VIP capacity to Mass and Premium Mass; and cost reductions. 

"We rate Galaxy Outperform with a 12-month price target of HK$29.75." says Bernstein. 

In related news, the company announced it would pay a special dividend of HK$0.15 on or about Apr. 29, having paid two other special distributions during calendar 2015.

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