Hong Kong-listed casino operator Galaxy Entertainment Group Ltd has gained about 2 percentage points in Macau gross gaming revenue share since the opening of the second phase of its Cotai flagship property Galaxy Macau (pictured), says UBS Securities Asia Ltd.
“Comparing gaming revenue market share in January-May versus June-July, we estimate Galaxy Entertainment has gained around 200 basis points of share to around 22.5 percent, driven by Galaxy Macau phase 2 and Broadway openings on May 27,” analysts Anthony Wong and Angus Chan wrote in a note published on Monday.
They added: “This is largely in line with our current forecasts which assume around 23 percent share for Galaxy Entertainment in the second half of 2015, but might be lower than some consensus expectations.”
The UBS report said Galaxy Entertainment’s share gain in the June to July period came at the expense of SJM Holdings Ltd and Wynn Macau Ltd, “with each losing around 100 basis points [of] share to around 21 percent and around 9 percent respectively”.
Mr Wong and Mr Chan estimated that Sands China Ltd maintained a market share of around 23 percent, with Melco Crown Entertainment Ltd at 14 percent and MGM China Holdings Ltd at 9.5 percent.
A number of investment analysts had recently raised the possibility that were Galaxy Entertainment not to achieve a gain in market share from its recent property openings, its margin on EBITDA (earnings before interest, taxation, depreciation and amortisation) could be pressured in the second quarter because of launch expenses.
Strategic value for SBM deal
In a separate note commenting on the recent acquisition by Galaxy Entertainment of a 5-percent stake in Monaco casino firm Société des Bains de Mer et du Cercle des Étrangers à Monaco – also known as SBM – brokerage Sanford C. Bernstein Ltd said the deal was positive for the Macau company.
“We believe the relatively small investment by Galaxy Entertainment has long-term strategic value, primarily stemming from the access to the luxury hospitality European brands owned by SBM and potentially a stronger relationship with LVMH Moet Hennessy Louis Vuitton SE,” analysts Vitaly Umansky, Simon Zhang and Bo Wen wrote in a note on Monday.
LVMH is also taking a 5-percent stake in SBM, the latter said.
The Sanford Bernstein team added: “LVMH is the world’s largest luxury goods maker and it owns many luxury brands that are highly valued by Asian customers (e.g. Louis Vuitton, Christian Dior, Fendi). In addition, LVMH owns [the] Cheval Blanc hotels group, which in the future could expand to Asia. As Galaxy Macau is gearing towards more non-gaming offerings (and the development of phases 3 and 4), we see strategic value in a stronger relationship with LVMH.”
A similar potential exists regarding SBM, which owns several high-profile luxury hotel brands in Monaco, the brokerage added. Monaco is a principality on the Mediterranean coast of southern Europe and is bordered by France.
SBM is listed on the Euronext Paris securities market, France’s main bourse. SBM’s casino properties comprise: Casino de Monte-Carlo; Casino Café de Paris; Sun Casino; and Monte-Carlo Bay Casino.
The firm’s portfolio also includes several hotel properties: Hotel de Paris Monte-Carlo; Hotel Hermitage Monte-Carlo; Monte-Carlo Beach; Monte-Carlo Bay Hotel & Resort; Villa La Vigie; and Villas du Sporting.
“Galaxy Entertainment may be able to leverage its relationship with SBM for Galaxy Entertainment’s future project developments,” the Sanford Bernstein report stated.
It added: “These luxury hospitality brands could be strong additions to Galaxy Entertainment’s future development pipeline as they would appeal to high net worth Chinese (and other Asian) customers.”
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"Competition is tough in Macau and is also changing. It [the local market] is susceptible to a lot of macro factors”
Daisy Ho Chiu Fung
Chairman of casino operator SJM Holdings Ltd