Oct 26, 2016 Newsdesk Latest News, Macau, Top of the deck  
Macau-based casino operator Galaxy Entertainment Group Ltd recorded gaming revenue of HKD12 billion (US$1.55 billion) for the third quarter of 2016, the company announced on Wednesday. The figure was up 5 percent in year-on-year terms, outperforming the overall Macau gaming market.
The firm stated in a press release that total mass table games revenue for the July to September period was HKD5.4 billion, up 17 percent year-on-year. Total VIP revenue for the group was HKD6.1 billion, down 4 percent year-on-year, Galaxy Entertainment added.
Market wide casino gross gaming revenue (GGR) in Macau’s mass segment expanded by 3.9 percent year-on-year in the third quarter of 2016, according to data released earlier this month by the local regulator, the Gaming Inspection and Coordination Bureau. Market wide VIP GGR in Macau fell by 1.2 percent year-on-year in the third quarter, according to the same set of data.
The market aggregate for all casino GGR in the third quarter 2016 was MOP55.0 billion (US$6.88 billion), a year-on-year increase of 1.2 percent. That represented the best quarterly performance the Macau market has seen since the second quarter 2014.
In its Monday release, Galaxy Entertainment said the group posted adjusted earnings before interest, taxation, depreciation and amortisation (EBITDA) of HKD2.7 billion for the third quarter of 2016, up by 28 percent in year-on-year terms. During the period, Galaxy Entertainment benefitted from above-average win rates in its gaming operations which increased adjusted EBITDA by approximately HKD240 million, the firm stated.
“Macau continues to transition to the mass market and Galaxy Entertainment continues to align our business with the direction of the market and allocate resources to their highest and best use,” company chairman Lui Che Woo (pictured in a a file photo) said in a prepared statement included in the firm’s results release.
He added: “We are encouraged by the continuing signs of market stabilisation, yet it remains too early to call the bottom of market. The recently reported growth in monthly revenue in August and September followed by a strong Golden Week in October are encouraging signs, but we would like some more time before calling it a definitive trend.”
Macau’s GGR rose 7.4 percent year-on-year in September, to MOP18.40 billion, announced on October 1 the local regulator.
The result marked only the second time in 28 months that monthly revenue had not contracted, judged year-on-year. The improvement began in August, when monthly casino GGR expanded by 1.1 percent after 26 straight months of decline.
Following the two consecutive months of GGR expansion judged year-on-year, there has been some optimism among operators and investors that the market might at least be stabilising. Two senior executives of casino operator SJM Holdings Ltd said earlier this month that Macau’s gaming sector was starting to show some sustained performance in October. MGM China Holdings Ltd co-chairperson Pansy Ho Chiu King has also said that Macau’s casino sector was showing signs of stabilisation.
Better than expected performance
Commenting on the Galaxy Entertainment third quarter results, Morgan Stanley Asia Ltd analysts Praveen Choudhary and Alex Poon stated actual EBITDA had beaten the investment bank’s estimate by 7 percent.
“Company EBITDA margin [was] up 200 basis points quarter-on-quarter and 360 basis points year-on-year to 20.7 percent, the highest in [Galaxy Entertainment’s] history,” they added.
The Galaxy Macau casino resort remained the main contributor to the group’s revenue and earnings in the third quarter 2016: the property reported revenue of HKD9.4 billion, up 8 percent year-on-year; and adjusted EBITDA of HKD2.2 billion, up 31 percent year-on-year.
VIP rolling chip volume at Galaxy Macau for the July to September period was HKD117 billion, down 6 percent year-on-year. This translated to revenue of HKD4.6 billion, an increase of 3 percent year-on-year and of 5 percent judged quarter-on-quarter.
Mass gaming revenue at Galaxy Macau – excluding electronic gaming – was HKD3.6 billion, up 19 percent year-on-year and 10 percent quarter-on-quarter. The property also had a positive quarter regarding non-gaming revenue: it stood at HKD761 million, up 3 percent year-on-year, and up 19 percent quarter-on-quarter.
Casino hotel Broadway Macau bucked the positive trend in mass gaming at the Galaxy Entertainment properties in the three months ended September. It posted mass gaming revenue of HKD103 million for the period, down 17 percent year-on-year and 10 percent quarter-on-quarter. The company said the negative results were partially impacted by below-average win rates. Broadway Macau has no VIP operations.
Galaxy Entertainment also owns and operates the casino hotel StarWorld, in downtown Macau. There are additionally three so-called “City Clubs” in the peninsula, functioning under Galaxy Entertainment’s casino licence but managed by third parties.
The firm said in its results release it continued “to move forward” with Phase 3 of Galaxy Macau, with “the potential to commence site preparation works in late 2016 and Phase 4 in 2017”. Similar guidance had been provided by the gaming operator in August.
Galaxy Entertainment added the concept plan for the firm’s Hengqin project “continued to progress”. The casino operator stated it expects to provide further details on the project “later in the year”.
Galaxy Entertainment signed in 2014 a framework agreement for a RMB10-billion (US$1.48-billion) non-gaming project on a 2.7-square-kilometre (1.0-sq-mile) parcel of land on Hengqin, an island under the jurisdiction of mainland China and adjacent to Macau’s Cotai district. In a filing in October last year, the firm said it was advancing conceptual plans for a “low rise, low density resort” on Hengqin.
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