Galaxy Posts First Profit Gain Since 2014 on New Resortsby
Company last posted quarterly profit increase in 3Q 2014
Two new projects in Macau began operating in May last year
Galaxy Entertainment Group Ltd. posted the first quarterly profit gain in more than a year as its new resorts drew in more casual gamblers and tourists.
First-quarter adjusted earnings before interest, taxes, depreciation and amortization rose 6 percent to HK$2.4 billion ($309 million), the Hong Kong-based company said Wednesday. Analysts projected profit of HK$2.47 billion, based on the median of five estimates in a Bloomberg News survey. It was the first year-on-year profit gain since the 1 percent increase in the third quarter of 2014.
The “solid” performance of Galaxy’s new projects “should drive best-in-class profit momentum,” DS Kim, an analyst at JPMorgan Chase & Co. in Hong Kong, wrote in a note April 18. The new resorts helped the operator gain market share and improve its shift toward the mass-market as well as non-gaming business, he said.
An anti-graft campaign and slowing economy in China have discouraged high-rolling VIP gamblers to Macau, the world’s biggest gambling hub, where gross gaming revenue has fallen for 22 straight months. Galaxy, along with with the Macau units of Wynn Resorts Ltd. and Las Vegas Sands Corp., are looking to attract tourists to new family-friendly resorts.
Galaxy was unchanged at 10:44 a.m. in Hong Kong trading at HK$28.20 a share. The benchmark Hang Seng Index gained 0.1 percent.
The casino operator reported mass market revenue from tables attracting casual gamblers was at HK$5 billion, a 17 percent increase from a year earlier and a 2 percent rise from last quarter. Revenue contributed by high-end gamblers saw a 17 percent year-on-year decline, as the company continues to allocate resources to the mass market and non-gaming, the company said in a statement.
Galaxy’s Macau Phase Two and Broadway Macau resorts, the first new projects in Macau in three years, began operating in May last year and features a 3,000-seat theater to broaden its appeal to families and tourists. The two properties have boosted Galaxy’s exposure to the mass-market segment.
The Macau government has encouraged casino operators to diversify their businesses and forecasts an increase in the proportion of casinos’ non-gaming revenue to 9 percent by 2020 from 6.6 percent in 2014, Teledifusão de Macau reported Tuesday, citing the city’s 5-year development plan.
Other casino operators are also looking for new ideas to diversify their business from high-end gambling. Melco Crown Entertainment Ltd. held its Hollywood-themed Studio City opening last October. The $4.1 billion Wynn Palace will offer air-conditioned cable car rides and Sands China Ltd’s Parisian will feature a half-size Eiffel Tower replica when they open later this year.