Galaxy Clears Way for New Macau Casinos With Early Earnings

Galaxy Macau Casino Resort

Galaxy Entertainment Group Ltd. pushed out quarterly results about a month earlier than usual, turning its attention to opening two new Macau casinos and winning back gamblers scared away by China’s crackdown on corruption.

The casino operator reported that first-quarter adjusted earnings before interest, taxes, depreciation and amortization, or adjusted Ebitda, fell 40 percent to HK$2.3 billion ($297 million), matching the median estimate of five analysts surveyed by Bloomberg. Revenue dipped 32 percent to HK$13.7 billion, driven by a decline in high-stakes gamblers.

Galaxy “must be busy internally” preparing for the opening of the expanded resorts, Victor Yip, an analyst at UOB-Kay Hian Holdings Ltd., said in an interview. “The new projects are so big, they want to get this out of the way before moving to the next thing,” he said.

The company is expanding as Macau casinos expect gaming receipts to fall to their lowest level since 2011 as the Chinese economy slows and President Xi Jinping’s nationwide graft crackdown stretches into a third year. Gross gambling revenue in the world’s largest gambling hub fell 39 percent to 21.5 billion patacas ($2.7 billion) last month -- the 10th-straight monthly decline.0

Galaxy is due to open two projects on Macau’s Cotai Strip May 27, making it the first among the city’s six major casino operators to open a wave of new and expanded resorts. In each of the past three years, Galaxy reported first-quarter results in mid-May.

Bad to Worse

Galaxy shares rose 3.8 percent to close at HK$37.95 in Hong Kong trading, amid a 0.4 percent increase in the benchmark Hang Seng Index. The BI Macau/China Gaming Market Competitive Peers Index gained 1.7 percent.

Analysts have raced to slash their forecasts for Macau casino revenue this year after a lackluster Lunar New Year showed the pace of the downturn was accelerating.

Demand from Chinese high-rollers “appears to be undergoing another leg down amid ever-strengthening anti-corruption efforts,” DS Kim, an analyst with JP Morgan Chase & Co., wrote in a note Thursday. He now forecasts a 23 percent decrease in Macau gaming revenue this year, down from 18 percent previously.

Galaxy reported Thursday that first-quarter revenue from VIP gamblers sank 41 percent to HK$8.7 billion while its mass market sales slumped 16 percent to HK$4.3 billion.

“We remain optimistic in the longer-term outlook for Macau despite the current challenges and we are now absolutely focused on executing the openings of Galaxy Macau Phase 2 and Broadway at Galaxy Macau,” the company said in its earnings announcement.

Before it's here, it's on the Bloomberg Terminal.