Morgan Stanley cuts Galaxy’s earnings outlook due to market share loss

The investment bank Morgan Stanley has lowered Galaxy Entertainment’s earnings forecast due to market share loss.

In the investment memo released on Tuesday, analysts noted that the market was expecting a market share gain after the opening of Phase 3 in 2H23, but ‘these did not materialize.’
As a result, Morgan Stanley has cut the stock's target price by 17 percent to HK$38.0 on a 14 percent lower 2024 EBITDA. Meanwhile, it also trims EBITDA by 7-8 percent for 2025 and 2026 based on lower market share expectations.
The gaming operator Galaxy Entertainment Group officially opened Phase 3 in December last year, intending to establish a new cultural landmark in the gaming hub.
Galaxy Macau’s Phase 3 focuses on non-gaming elements, including the Galaxy International Convention Center (GICC), which has an area of approximately 40,000 square meters and a pillar-free exhibition hall spanning 10,000 square meters on the ground floor.
Morgan Stanley also mentions that 1Q24 will be a ‘negative catalyst,' as analysts expect Galaxy's 1Q24 corporate EBITDA to be at 2 percent quarter-to-quarter to HK$2.9 billion ($370 million), or 72 percent of 1Q19, and ‘weaker’ than the industry's 5 percent quarter-to-quarter, or 81 percent of 1Q19. ‘This is driven by mass share loss and operating deleverage,’ it concludes.
Morgan Stanley also notes that may turn ‘more positive’ if they see a more visible trend of market share gains from 2H24. 
‘Galaxy has a very strong track record in running and ramping up operations. Also, some investors favor its net cash position amid uncertain China macro.’it added.

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