Things Are Finally Looking Up for One of Macau's CasinosBy
Macau casino operator benefits from high-stakes gambling
Company working to resume normal operations after typhoon
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Galaxy Entertainment Group Ltd. posted its biggest quarterly earnings gain in almost five years as high-stakes gamblers helped to boost profit in the world’s largest casino hub.
The Macau casino operator’s adjusted earnings before interest, taxes, depreciation and amortization climbed 45 percent to about HK$3.29 billion ($420 million) in the second quarter, according to Bloomberg calculations based on Galaxy data released Thursday. That’s the steepest increase since the third quarter of 2012, and tops the median estimate of HK$3.2 billion from eight analysts surveyed by Bloomberg.
Shares of Galaxy rose 1.8 percent in Hong Kong to close at HK$49.10, the highest since December 2014. The stock has advanced about 45 percent this year.
Casino operators in Macau including Galaxy are benefiting from high-stakes VIP gamblers, even as the companies shift to courting tourists and leisure gamblers. The company has boosted business in the higher margin mass-market segment and non-gaming elements such as hotels to fend off competition from MGM Resorts International and Las Vegas Sands Corp.
Galaxy posted a “strong performance in the context of the competitive new supply on Cotai,” said Union Gaming Group LLC analyst Grant Govertsen after the results, referring to the Macau strip where new casinos have popped up. “In addition, their StarWorld property on the peninsula continues to show strong growth, making it a significant outperform in that geography.”
Still, there are concerns that China’s efforts to curtail capital outflows could squeeze availability of funds for junkets. The government said this month it will prohibit or restrict domestic companies from making overseas investments in sectors including gaming industry, real estate, hotels and entertainment.
The naming of “restricted” industries may have an impact on the junkets’ liquidity environment, as a portion of their collateral base and liquidity channels involve real estate, investment platforms, and entertainment-related sectors, Jamie Soo, an analyst at Daiwa Capital Markets Hong Kong Ltd., wrote in a note on August 21.
Galaxy’s gaming revenue from high rollers, which accounts for more than half of the group’s total gaming receipts, increased 5 percent in the first half of the year. Mass table games revenue grew 15 percent in the six months.
Operations at some casinos were disrupted this month after a typhoon affected power and water supply. Deutsche Bank AG cut Macau’s August gaming revenue growth forecast to as low as 16 percent from the previous 22 percent to 24 percent, as the impact of typhoon Hato may linger for weeks, Deutsche Bank analyst Karen Tang wrote in a note Monday.
“We are doing our best to resume normal operations as quickly as possible and we are confident that Macau and Galaxy Entertainment Group’s short and long-term prospects remain bright and promising,” Galaxy said in the statement.