A 60 percent dividend payout ratio is possibly “not the ceiling” for Macau casino operator Galaxy Entertainment Group Ltd, says brokerage JP Morgan Securities (Asia Pacific) Ltd. The Tuesday commentary followed analyst discussion with management after the casino group issued its first-half earnings.
Galaxy Entertainment’s profit rose 19.4 percent year-on-year, to HKD5.24 billion (US$667.6 million), and it announced an interim dividend of HKD0.7 per share, payable on October 31.
Senior analyst Vitaly Umansky of Seaport Research Partners stated in its Tuesday memo: “Galaxy had previously announced a HKD0.50 final dividend to be paid in June (following HKD0.80 in dividends paid in 2024) and has now announced a HKD0.70 interim dividend payable in October.”
He added: “There is strong potential for the dividend to continue to rise over the next few years as operating cash flow improves.”
JP Morgan analysts DS Kim and Selina Li wrote: “Galaxy is committed to returning capital to shareholders in a sustainable manner, and management/the board felt comfortable stepping up its payout [ratio] to approximately 60 percent after reviewing its free cash flow/capital expenditure outlook.”
They added: “Management … will review the situation at year-end and in the future to see if there is room for further and sustainable increases, which suggests to us that 60 percent is not the ceiling, especially into 2027, 2028, when its capex for Phase 4 will taper off.”
Jefferies Hong Kong Ltd stated in a Tuesday memo on the casino group: “Galaxy Entertainment raised its payout policy from 30 percent in first-half 2023 to 50 percent for first half 2024 … and it raised its first-half 2025 payout [ratio] to 58 percent. Management will have another review by year-end.”
Jefferies’ analysts Anne Ling and Jingjue Pei noted that Galaxy Entertainment expects under HKD4-billion capital expenditure for the second half of 2025, bringing such 2025 expenditure to HKD7 billion for the year.
Galaxy Entertaiment’s chairman Francis Lui Yiu Tung had mentioned in the earnings statement that Galaxy Macau Phase 4 – including new hotel brands, a 5,000-seat theatre, extra restaurants and shops, plus a casino, was due for completion in 2027.
As of June 30 this year, Galaxy Entertainment had cash and liquid investments of HKD30.7 billion, with “minimal debt,” noted Mr Lui.
Competition and player reinvestment
Galaxy Entertainment’s main gaming operations are at Galaxy Macau in Cotai, and StarWorld Hotel downtown on Macau peninsula.
All the brokerages cited management commentary on competition for players in the Macau casino market, including costs to retain and incentivise players, sometimes referred to as player reinvestment.
Seaport said that Galaxy Entertainment had gained market share year-on-year, reaching 20.2 percent in the second quarter this year, with gains in mass and VIP, the “best since second-quarter 2019 excluding Covid years”.
The brokerage also observed: “Galaxy saw a quarter-on-quarter increase in player reinvestment … as a percentage of mass market table games, similar to several competitors.
“We do expect material increases going forward and while the market is competitive, we see stabilisation of player reinvestment in the second half.”
Jefferies observed in its memo the casino firm’s “management thinks the competition is intense but has not deteriorated year-to-date,” in terms of its impact on business performance.
The brokerage added in relation to incentives for high-rollers: “Commission increase is in line with VIP volume growth (+20 percent quarter-on-quarter).”
JP Morgan stated: “Management believes the level of competition/promotion has remained ‘quite stable’ over the past two to three quarters, echoing what peers have said during their second-quarter 2025 calls.”
Jefferies also gave some commentary on Galaxy Entertainment’s efforts to boost its yield from its gaming inventory.
Its analysts observed in their Tuesday memo: “StarWorld is undergoing remodelling in the next few quarters. Management is transitioning the property to a more mass-friendly one and has moved 100 tables to Galaxy Macau for better returns.”
The casino firm’s leadership had mentioned last year plans for a revamp of StarWorld Hotel. In its third-quarter 2024 results, the group mentioned an “upgrade of Level 3” at StarWorld meant it now “hosts one of the largest-scale live [electronic] table games terminals” setups in the Macau market.
