Galaxy 4Q14 EBITDA falls 25 percent

Thursday 19th of March 2015

In what has been a challenging quarter for casino operations in Macau, Galaxy Entertainment Group reported a decrease in fourth quarter EBITDA of 25 percent to HK$2.7 billion (348 million), though full year revenue rose 9 percent to HK$71.8 billion.

The company’s Galaxy Macau casino raked in $46.9 billion in revenue for the entire year as fourth quarter adjusted EBITDA decreased 19 percent year-on-year to HK$2 billion. Galaxy’s StarWorld casino’s EBITDA decreased 38 percent year-on-year to HK$645 million in the fourth quarter and entire year revenue decreased 4 percent to HK$22.6 billion.

“There can be no doubt that the second half of 2014 was one of the most challenging periods in the history of Macau. It is therefore more important than ever that all stakeholders in the industry and Macau pull together in one direction to ensure Macau fulfils its vast economic and social development potential,” said Lui Che Woo, Chairman of GEG. The company says the year proved mixed in performance, with total gaming revenue in the first half increasing 13 percent year-on-year and registering an all-time monthly high in February of $36.9 billion, up 40 percent year-on-year.

“However, a confluence of factors such as the FIFA World Cup, China’s soft economic landing, rising costs and the Chinese austerity program etc, weighed on the market in the second half resulting in 3% decline in full year total gaming revenue to $341.3 billion.” “We remain optimistic about the future as the fundamental growth drivers for the market such as increasing domestic consumption in China, a rapidly growing affluent middle class and major planned infrastructure improvements, remain unaltered.”

UBS analyst Anthony Wong said the fourth quarter results were slightly below expectations. “Galaxy reported Q414 Group EBITDA of HK$2.66bn (-25% YoY, -18% QoQ), slightly below our estimate of HK$2.71bn and consensus estimate of HK$2.78bn, mostly due to higher opex at Galaxy Macau.” “Group wide VIP rolling volume dropped 14% QoQ, and mass revenue dropped 13% QoQ, both weaker than industry QoQ trends at -7%/-12% respectively.”