Galaxy Entertainment Drops as Profit Lags Estimates

Galaxy Entertainment Group Ltd. Chairman Lui Che Woo
Galaxy Entertainment Group Ltd. Chairman Lui Che Woo. Photographer: Brent Lewin/Bloomberg

Galaxy Entertainment Group Ltd., the Macau casino operator that made Lui Che-woo Asia’s second-richest person, fell the most in more than a week in Hong Kong after reporting earnings that missed estimates.

Galaxy dropped 2.8 percent to close at HK$72 in Hong Kong trading, the most since March 10, while the benchmark Hang Seng Index was little changed. Fourth-quarter adjusted earnings before interest, taxes, depreciation and amortization, or adjusted Ebitda, increased to HK$3.5 billion ($451 million), lagging behind the HK$3.67 billion average of nine analyst estimates compiled by Bloomberg.

“The fourth-quarter result was a slight miss mainly due to unfavourable luck factor,” D.S. Kim, a Hong Kong-based analyst at BNP Paribas Securities Asia Ltd., said by phone today. “It’s temporary and nothing structural.”

Galaxy, which said it will pay a special dividend for this year, faces intensifying competition as operators such as Galaxy, Melco Crown Entertainment Ltd. and Sands China Ltd. add malls, theaters and restaurants to attract Chinese visitors to Macau. An improved rail connection and increased hotel supply are helping to lure more vacationing Chinese, or mass-market gamblers, to the only Chinese city where casinos are legal.

The Hong Kong-based company said it plans to pay a special dividend of 70 Hong Kong cents a share for 2014. It didn’t declared a dividend for last year.

Galaxy Macau

Net income rose 36 percent to HK$10.1 billion in 2013, with revenue up 16 percent to HK$66 billion, the company said in a filing to Hong Kong’s stock exchange today.

At Galaxy Macau, the biggest of six casinos controlled by the company, VIP turnover, or bets by high-stakes gamblers, rose 11 percent to HK$774.1 billion in 2013. Mass-gaming revenue climbed 44 percent to HK$10.5 billion in the period.

VIP turnover at StarWorld Macau rose 5 percent and mass-gaming revenue jumped 59 percent in 2013.

Galaxy today also said it entered into a framework agreement with the authority of the neighboring Hengqin island to proceed with a proposed 10 billion yuan ($1.6 billion) plan to develop a resort on a piece of land measuring 2.7 square kilometers (29 million square feet).

Hengqin is an island next to Macau that’s connected by a bridge and is earmarked for non-gaming purposes.

High Rollers

Galaxy Macau has gained VIP market share as it opened a new room for high rollers with 12 tables in September, according to Karen Tang, a Hong Kong-based analyst at Deutsche Bank AG.

Lui, who has a net worth of $22.4 billion, is Asia’s second-richest person after Hong Kong tycoon Li Ka-shing, according to the Bloomberg Billionaires Index.

Galaxy is also expanding in the Cotai area, Asia’s equivalent of the Las Vegas Strip. The casino operator is spending HK$20 billion on the second-phase expansion of the Galaxy Macau resort and will add as many as 500 gaming tables and 1,300 rooms from the JW Marriott and Ritz-Carlton hotels by mid-2015. It will hire “several thousands” of workers for the second-phase expansion, Chief Operating Officer Michael Mecca said at a press conference in Hong Kong today.

Galaxy also plans to spend as much as HK$60 billion for the third and fourth phases which will start construction by end of this year and begin operations from 2016 through 2018.

The casino operator in July completed the HK$3.25 billion purchase of the Grand Waldo complex in Macau, which includes a spa and hotel. Refitting works are underway and the company expects to unveil its plans in the middle of this year, Galaxy said today.

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