Galaxy Entertainment Group Ltd. (27), the Macau casino operator founded by billionaire Lui Che Woo, reported quarterly earnings above analyst estimates as Chinese tourists boosted spending in the world’s biggest gambling hub.
Adjusted earnings before interest, taxes, depreciation and amortization, or adjusted Ebitda, rose 18 percent to HK$3.02 billion ($389 million) for the second quarter ended June, Galaxy said in a stock exchange statement today. That compares with the HK$2.88 billion median of nine analyst estimates compiled by Bloomberg News.
New attractions, increased hotel supply and an improved rail connection are drawing more mainland Chinese visitors to Macau, the only place in China where casino gambling is legal. Galaxy is expanding in the city’s Cotai area, Asia’s equivalent of the Las Vegas Strip, to compete with rivals including Sands China Ltd. (1928), which tripled profit in the second quarter.
“The prospects for Macau and our company for the rest of this year and beyond are encouraging,” Chairman Lui Che Woo said in a press conference today. “Macau will benefit from the major infrastructure and transport improvement, and the VIP growth will remain robust.”
Visitors from mainland China accelerated in the second quarter, surging 20 percent in June, according to data from Bloomberg Industries.
First-half net income increased 35 percent to HK$4.6 billion, while revenue rose 9 percent to HK$30.8 billion. VIP turnover at Galaxy Macau, the company’s flagship casino, dropped 4 percent to HK$178.2 billion in the second quarter, while mass gaming revenue grew 13 percent to HK$6.85 billion.
The company will add 12 VIP gaming tables at Galaxy Macau by October, Deputy Chairman Francis Lui told reporters at the same conference. It received government approval this year to add 50 gaming tables there.
“VIP revenue growth has been rather solid,” Francis Lui said, referring to the industry’s annual growth, “It grew by 10 percent in the first half. I don’t see VIP spending falling dramatically for the rest of this year.”
The Hong Kong-based company last month completed the HK$3.25 billion purchase of Grand Waldo complex in Macau, which includes a spa and hotel, to increase its presence in Cotai. The company said it will take six to nine months to relaunch the Grand Waldo casino, which is adjacent to Galaxy Macau.
The casino operator is also boosting the budget for Galaxy Macau’s second-phase expansion by HK$3.6 billion to HK$19.6 billion to double the size of the resort.
The phase-two expansion, which the company has started, will add as many as 500 gaming tables and 1,300 rooms from the JW Marriott and Ritz-Carlton hotels by mid-2015.
Galaxy plans to spend as much as HK$60 billion to begin the third and fourth phases of the project as early as the end of this year and begin operations from 2016 through 2018.
The company didn’t declare an interim dividend because of the planned expansion. It may consider raising funds by selling debt, though it won’t finance the expansion via a sale of equity, Chief Finance Officer Robert Drake said at the conference.
Gross gaming revenue in Macau is expected to grow 17 percent to $44.5 billion from $38 billion last year, according to Deutsche Bank AG estimates.
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