Galaxy Says VIP Demand Improving as Profit Rises
Galaxy Entertainment Group Ltd. (27), the Macau casino operator founded by billionaire Lui Che Woo, posted a 29 percent increase in first-quarter earnings and said it is seeing signs of improved demand from high-stake gamblers.
Adjusted earnings before interest, taxes, depreciation and amortisation, or Ebitda, for the quarter ended March rose to HK$2.8 billion ($357 million) from HK$2.15 billion a year ago, Hong Kong-based Galaxy said in a statement. That compares with a median estimate of HK$2.79 billion from six analysts compiled by Bloomberg News.
An increase in new attractions, hotel supply as well as an improved rail connection are drawing more mainland Chinese visitors to Macau, the world’s biggest gambling hub. Galaxy is expanding in the city’s Cotai area, the Asia’s equivalent of Las Vegas strip, to compete with rivals including Sands China Ltd. (1928), whose first quarter profit jumped 63 percent.
“There have been positive signs that demand in the VIP segment is regaining momentum,” Galaxy said in today’s statement, referring to the high-stake gamblers who provide most of Macau’s revenue. VIP gamblers curbed spending last year as China’s economy weakened.
Revenue climbed 15 percent to HK$15.2 billion. Turnover for VIP gambling during the first quarter fell 2 percent at the Galaxy Macau and 15 percent at its Starworld Hotel & Casino.
Galaxy said last week that it will pay HK$3.25 billion for Grand Waldo which includes a spa, casino and hotel, to increase its footprint on Cotai. It’s also investing as much as HK$66 billion to build the second and third phases of its Galaxy Macau, its flagship casino resort in Cotai that opened in May 2011.
Gross gaming revenue in Macau, the only place in China where casino gambling is legal, is expected to grow 17 percent to $44.5 billion from $38 billion last year, according to Deutsche Bank AG estimates.
Galaxy is investing about HK$16 billion in the second phase to almost double the current size of its Cotai resort as it competes with Sands and Melco Crown Entertainment Ltd. (MPEL) 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 2015.
Galaxy is also planning to spend up to HK$50 billion to begin phase-three expansion of the project at the end of 2013 or the beginning of 2014.
The company has received approval from the government to add 50 tables this year, deputy chairman Francis Lui said in March.
Galaxy faces competition from Sands China Ltd. and Melco Crown Entertainment Ltd. (6883) as it expands in Macau’s Cotai area, the Asia’s equivalent of Las Vegas strip. All three companies as well as Wynn Macau Ltd. (1128) and MGM China Holdings (2282) are building new resorts in the Cotai area. Sands China earlier reported a 63 percent jump in first quarter profit.
Sands China, the Macau casino controlled by billionaire Sheldon Adelson, received approval in January to add 200 additional gambling tables. Its latest resort, Sands Cotai Central, was opened in April last year. Sands is investing $2.8 billion in the world’s largest gambling hub to build its fifth on Cotai.
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