Galaxy Q2 results top forecasts on higher hold

Tuesday 13th of August 2019

Galaxy Entertainment posted flat adjusted EBITDA for Q2 and lower revenue, but the results topped analysts’ forecasts helped by higher hold.

Net revenue was down 5 percent year-on-year to HK$13.2 billion, while adjusted EBITDA was $4.3 billion, higher than the Bloomberg consensus estimate of $4.0 billion.

Bernstein notes that all properties benefited from a higher hold and adjusted for the luck factor, EBITDA would have been $349 million lower, in line with the consensus.

VIP hold at Galaxy Macau was 4.4 percent compared with 3.5 percent a year earlier, while mass was 27.6 percent, compared with 26.7 percent. At StarWorld VIP was 3.3 percent vs 3 percent, while mass was 19.5 percent vs 18.6 percent.

Gross gambling revenue in the period fell 11 percent to $15.2 billion, mainly due to a 25 percent drop in VIP revenue to $7.3 billion. Mass GGR rose 6 percent to $7.3 billion.

Bernstein analysts note the group’s margin improved on a better business mix. VIP GGR made up 50 percent of the total, down from 58 percent in the same period last year.

The company had 20.6 percent share of the Macau market in the period, down from 23.2 percent in Q2, 2018.

Galaxy said it’s proceeding with a $1.5 billion upgrade of its Galaxy Macau and StarWorld properties, which includes preparation work to eventually link to the third and fourth phases of the group’s development plans.

These include a further 4,500 hotel rooms, including family and premium high end rooms, 400,000 square feet of MICE space, a 500,000 square feet 16,000-seat multi-purpose arena, F&B, retail and casinos.

It also said it’s continuing with its plans for a resort on neighbouring Hengqin Island and it’s team in Japan is proceeding with its bid for a license, along with its partner, the Monaco-based Societe des Bains de Mer.

In its earnings note, Galaxy said it remains confident in Macau’s long-term future, due to China’s outbound tourism trends and improving infrastructure that eases access to the territory. However, shorter term it said it was seeing rising competition from casinos around Asia that are targeting Chinese consumers and said trade tensions are harming consumer sentiment.