Macau casino operator Galaxy Entertainment Group Ltd has already topped out Phase 4 of its flagship property Galaxy Macau (pictured) in Cotai, “and still has another HKD20 billion [US$2.56 billion] capex to be spent,” stated a note from HSBC, citing comments from the casino firm’s management.
The institution hosted in Singapore, Ted Chan Ying Tat, Galaxy Entertainment’s chief financial officer, and Peter Caveny, the assistant senior vice president of investor relations.
“Galaxy Entertainment is looking to bring forward the original 2027 timeline by 1 to 2 years. The new integrated resort will house 1,600 rooms across six hotel brands, which do not have presence in Macau now,” wrote HSBC gaming research analysts Charlene Liu, Jessie Lu, and Lauren Cai in a Friday note.
“Redevelopment of Broadway and Hengqin plan are also in the pipeline, but both will only happen after Phase 4 is completed,” said the memo.
“With HKD20 billion net cash in hand and positive free cash flow, Galaxy Entertainment has sufficient liquidity to cover outstanding capex plans,” stated the bank’s team.
The casino firm “is actively reviewing its dividend policy,” noted the institution. “While a meaningful uplift in dividend payout will only happen post [Galaxy Macau’s] Phase 4, we expect Galaxy Entertainment to sustain recurring dividends near term,” added the analysts.
According to the institution, third-quarter business volume for Galaxy Entertainment was “off to a good start”.
“Galaxy was positively surprised by strong June demand, which appears to be holding up into the summer,” wrote the HSBC analysts. “Galaxy’s hotel rooms are fully booked through August, despite unveiling the 400-roomed all suite Raffles Hotel on 1 July.”
The Raffles at Galaxy Macau hotel tower, part of Galaxy Macau Phase 3 project, began welcoming guests in early July, but to a “limited number” of invited guests only.
According to Galaxy Entertainment’s management, player profiles and gaming behaviour “have not changed much versus pre-pandemic” trading periods, “although visit frequency is down circa 10 percent”.
“A higher contribution from non-Guangdong (circa 60 percent) visitors has had a positive impact on length of stay, plus hotel guests’ gaming budget is 2.2 times that of non-staying guests,” stated the note.
It also cited the firm’s management as saying that the “introduction of more non-gaming events” had “lifted younger players in the customer mix and boosted luxury sales in some instances”.
The casino operator has been hosting several concerts at its new arena at Galaxy Macau, including a sold-out two-day show in May from South Korean K-pop group Blackpink.
“Galaxy Entertainment currently comps circa 80 percent of its rooms, but allocation to mass is much higher than pre-pandemic,” stated the note. “Despite resuming a junket room, Galaxy Entertainment is taking a wait and see approach towards VIP.”
Galaxy Entertainment reported first-quarter adjusted earnings before interest, taxation, depreciation and amortisation (EBITDA) of just below HKD1.91 billion, on net revenue that rose 141.9 percent sequentially, to HKD7.05 billion.
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