Galaxy to Invest $2.1 Billion to Expand Resort in Macau
Galaxy Entertainment Group Ltd. (27), the Macau casino operator that more than tripled earnings last year, plans to invest about HK$16 billion ($2.1 billion) to almost double the size of its resort in the world’s largest gambling hub.
The second phase of the company’s Galaxy Macau resort on the territory’s Cotai strip will add as many as 500 gaming tables and offer 1,300 more hotel rooms, the company said in a statement to Hong Kong’s stock exchange today. The resort, which will span 1 million square meters, is scheduled to open by the middle of 2015 and construction has started in the first quarter, it said.
Galaxy’s expansion will intensify competition in the former Portuguese colony where rivals including Sands China Ltd. (1928), Wynn Macau Ltd. (1128), and Melco Crown Entertainment Ltd. (6883) are planning projects to draw more Chinese tourists. Gamblers from China’s mainland have driven up revenue for Macau casino operators.
“The phase two project is bringing online what the market needs,” said Grant Govertsen, an analyst at Union Gaming Group. The project “cements” Galaxy’s presence as the second-largest casino operator in Macau’s Cotai Strip, he said.
Galaxy shares rose 3.7 percent to HK$23.75 at the close of Hong Kong trading. The benchmark Hang Seng Index gained 0.8 percent. The company’s shares have surged 67 percent this year, compared with a 13 percent gain for the Hang Seng.
Galaxy, founded by Hong Kong property tycoon Lui Che Woo, opened the $1.9 billion Galaxy Macau resort in May last year. The project helped more than triple its profit in 2011. The expansion will add to its existing 450 gaming tables in the resort. Galaxy also operates casino-hotels such as Starworld hotel, Waldo and Grand Waldo casinos in the former Portuguese colony.
The new phase will add luxury stores and 1,300 rooms from the JW Marriott and the Ritz-Carlton, taking the total to 3,600 rooms across five hotels on the Cotai Strip, modeled on the Las Vegas Strip.
“These developments will serve as a catalyst for future growth and diversification of Macau’s tourism and leisure market,” the casino operator said in a statement. Galaxy plans to fund the project through cash and debt, and doesn’t plan to issue equity, it said.
The company now has HK$7.7 billion cash on hand, chairman Lui Che Woo said in a press conference, as well as HK$6 billion free cash flow generated from operation, chief financial officer Robert Drake said in an interview today.
Billionaire Sheldon Adelson’s Hong Kong listed unit, Sands China, opened the first phase of Sands Cotai Central on the Cotai Strip earlier this month. The new property will have more than 400 gaming tables and about 5,800 hotel rooms when completed in 2013 under the brands Conrad, Sheraton and Holiday Inn. The company already operates the island’s largest resort, the Venetian Macau.
Macau is the world’s biggest casino hub, with $34 billion in gambling revenue last year, almost six times the $6.07 billion of Las Vegas, according to figures provided by the Macau and Nevada authorities.
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