Profit at Macau casino operator Galaxy Entertainment Group Ltd fell 3.4 percent year-on-year, on group revenue that slipped 6.0 percent, the firm said in its full-year and fourth-quarter results on Thursday.
Such profit was HKD13.04 billion (US$1.67 billion) compared to nearly HKD13.51 billion a year earlier. Group revenue contracted to HKD51.90 billion, from HKD55.21 billion in 2018.
The group also has modest levels of borrowing compared to some of its market rivals, that have already announced they were seeking to adjust loan terms in the light of the market collapse in the first quarter this year due to the coronavirus alert. As of December 31, Galaxy Entertainment had only HKD600 million in debt.
The group’s full-year adjusted earnings before interest, taxation, depreciation and amortisation (EBITDA) – including its share of results of joint ventures and associated companies – was down 2.2 percent, at HKD16.48 billion, from HKD16.86 billion.
Gross revenue from gaming operations group-wide – before costs such as commissions and incentives – was down 12.3 percent in 2019, at just under HKD57.21 billion, from HKD65.23 billion.
Market-wide in Macau, casino gross gaming revenue (GGR) contracted 3.4 percent year-on-year in calendar year 2019, the local regulator had reported on January 1.
In the three months to December 31, Galaxy Entertainment saw its net revenue decline 8.3 percent year-on-year, to HKD12.9 billion. Net gaming revenue for the period was HKD10.75 billion, down 11.5 percent from fourth-quarter 2018. Adjusted EBITDA in the final three months of 2019 was HKD4.05 billion, down 6.5 percent from a year earlier.
In a note on Thursday, brokerage Sanford C. Bernstein Ltd said Galaxy Entertainment fourth-quarter results were “in-line” with analysts’ expectations. “Galaxy lost market share in fourth quarter on year-on-year basis … which was expected due to ramp up of newer Cotai properties” from its market rivals, said the institution.
2019 commissions, rolling chip
Full-year 2019 saw Galaxy Entertainment cut commissions and incentives on gaming operations by 25.2 percent, to HKD13.62 billion, from nearly HKD18.21 billion in 2018.
Group-wide rolling chip volume for full-year 2019 was nearly HKD715.99 billion, down 35.1 percent from the previous year. Mass-market table drop for the period rose by 1.9 percent year-on-year to HKD121.88 billion, but revenue from electronic games fell by 6.2 percent, to HKD67.94 billion.
At the firm’s flagship Cotai resort, Galaxy Macau, rolling chip volume in the VIP segment declined by 37.4 percent. Such volume was HKD485.34 billion in 2019, versus HKD775.43 billion a year earlier. Investment analysts have previously noted in commentary on the Macau market, that Galaxy Entertainment was frequently a leader in the VIP segment in terms of service and facilities.
Galaxy Macau saw its mass-market table drop go up 3.6 percent, to HKD72.79 billion, versus HKD70.29 billion in 2018. But electronic gaming volume at Galaxy Macau was down 13.7 percent year-on-year, to HKD45.57 billion.
The group said in commentary on its results that what it termed “fluctuation” in “investor sentiment” in the wider world had had an impact on the 2019 results.
“This was a result of a number of geopolitical and economic issues such as Sino-U.S. trade tensions, a slowing world economy, introduction of the VIP smoking ban, renminbi fluctuations, continuing competition from regional markets and disruption in Hong Kong,” added Galaxy Entertainment.
In a letter to fellow shareholders at the beginning of the results filed to the Hong Kong Stock Exchange, the group’s chairman Lui Che Woo also expressed his “personal concern” at the coronavirus outbreak and its impact on the Macau gaming market.
The group nevertheless announced on Thursday a special dividend amounting in aggregate to approximately HKD1.96 billion – equal to HKD0.45 per share – to be paid on or about April 24. There was no final dividend.
Galaxy Macau adjusted EBITDA slipped 1.8 percent, to HKD12.64 billion, versus HKD12.87 billion a year earlier.
StarWorld Hotel, the group’s main venue on Macau peninsula, saw its annual adjusted EBITDA down 8.1 percent, to HKD3.50 billion, from HKD3.81 billion.
Broadway Macau, the mass-market focused property next door to Galaxy Macau, witnessed its adjusted EBITDA rise by 21.9 percent, to HKD39 million, from HKD32 million.
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Partner and director overseeing government affairs at casino industry consultancy Global Market Advisors