Macau casino operator Galaxy Entertainment Group Ltd is considering “major upgrades” at the firm’s StarWorld Hotel property (pictured) on the city’s peninsula, the first of the company’s self-developed venues, which opened in 2006.
That is according to comments by Ted Chan Ying Tat, the firm’s chief financial officer (CFO), during the conference call with investment analysts, following the group’s fourth-quarter and full-year results issued on Wednesday.
“At StarWorld, we are evaluating a range of major upgrades, that includes the main gaming floor, the lobby experience and increasing food and beverage options,” stated Mr Chan, according to the script published by Seeking Alpha.
Turning to Galaxy Entertainment’s newer and evolving Cotai flagship, Galaxy Macau, Mr Chan said the company was “undertaking significant” renovation at the main gaming floor at the complex.
“In the fourth quarter, we were still onboarding our full complement of staff and undertaking significant main gaming floor renovation at Galaxy Macau,” he added. “We are also currently completing the construction of a new high-limit slot area and other amenities.”
The CFO also said the company would be investing “around HKD5.1 billion” [US$651.6 million]” this year in Phase 3 and Phase 4 of Galaxy Macau. There would also be an “additional” HKD1 billion invested into other expansion projects and concession-related requirements, he added.
As part of the expansion of Galaxy Macau, a new hotel – referred to as “Phase 3D” – is scheduled to open next year, said Mr Chan.
“The 100-room property … we are targeting to open in 2025. And that will be a very high-end luxury product and very unique in the market,” the executive added. “I believe that will address on the very high-end premium-mass segment that we are looking at.”
The new hotel tower does not have its own gaming venue, but “is connected directly to the [existing] gaming floor,” he explained, adding that the new accommodation tower “will be only for our top premium mass customer and our VIP direct customers”.
Galaxy Entertainment is now focused on Phase 4 of Galaxy Macau, scheduled to be completed in 2027. It will feature “multiple high-end hotel brands,” as well as a 4,000-seat theatre, retail and a water resort deck.
Higher expenses
CBRE Capital Advisors Inc said in a Wednesday note that while market share for Galaxy Entertainment “has been trending lower in recent quarters,” it was still the only Macau operator currently to be issuing a shareholder dividend.
While Galaxy Entertainment’s recovery in terms of earnings before interest, taxation, depreciation and amortisation (EBITDA) had “lagged other operators” in Macau, this was “due primarily to the opening and higher operating expenses associated with the Phase 3 amenities,” wrote CBRE analysts John DeCree and Max Marsh.
The operator should “benefit as the base and casual” market segments “further recover in 2024,” they added, noting Galaxy Entertainment had a “fortress balance sheet,” and “long-term growth potential”.
As of December 31, Galaxy Entertainment’s cash and liquid investments amounted to HKD25.0 billion and its net cash figure was HKD23.5 billion. Total debt was HKD1.5 billion, which the firm said primarily reflected its “ongoing treasury yield management initiatives”.
On the call, Galaxy Entertainment’s CFO said the company’s staff in the fourth quarter was “about 93 percent of 2019’s level”. We believe that we will be tied with 2019’s level in terms of total operational expenditure around this [first] quarter,” noted Mr Chan.
JP Morgan Securities (Asia Pacific) Ltd mentioned in a Wednesday memo that the operator’s fourth quarter gross gaming revenue (GGR) market share had slipped to 17.7 percent, from 18.5 percent in the third quarter.
But the brokerage stated, referring to changes at Galaxy Macau, including a revamp of the main gaming floor completed during the current quarter, and the opening of Phase 3 facilities in the second half of last year, including some gaming relocated to the tower that houses the Raffles at Galaxy Macau hotel: “One quarter doesn’t make a trend (yet) as the new casino ramp typically takes six to eight quarters, so we’d patiently monitor the pace of ramp from here.”
