The launching of the third phase of Galaxy Macau will help the casino resort expand its market share, namely in the premium mass segment, says JP Morgan Securities (Asia Pacific) Ltd.
“Phase 3 will make the ‘Galaxy Cluster’ an even more appealing holistic destination, which in turn should – yet again – help it to further gain share, particularly for premium mass,” wrote analysts DS Kim and Mufan Shi in a note on Friday.
Macau-based casino operator Galaxy Entertainment Group Ltd, the operator of Galaxy Macau, said on Thursday it planned to open “progressively” Phase 3 of the resort, starting in the second quarter of this year.
That includes the Galaxy International Convention Center, featuring the 16,000-seat, multipurpose Galaxy Arena, and 40,000 square metres (430,556 sq feet) of space for meetings, incentives, conferences, and exhibitions (MICE). The venue will welcome its first MICE event, as well as its first concert, in April, Galaxy Entertainment said on Thursday.
Phase 3 also includes two hotels. The Raffles tower, with 450 rooms, will open in the second quarter. Regarding Andaz Macau, with 700 rooms, Galaxy Entertainment plans to “continue to monitor market conditions” and open the hotel “when appropriate”.
In its Friday note, JP Morgan said that Galaxy Entertainment “estimates it would only need additional 700 non-gaming [employees]” to staff the third phase of Galaxy Macau.
That, noted the brokerage, implied the total number of workers at Galaxy Entertainment “would likely settle at 18,000 to 19,000 [employees] post-phase 3 versus 22,000 in 2019”. Such achievement would be “pretty impressive and should allow the company to further optimise cost/margin structure,” stated the JP Morgan analysts.
The JP Morgan memo also quoted commentary from the management of Galaxy Entertainment in a private conference call with investment analysts following the firm’s release on Thursday of its fourth-quarter results. The memo said that the company’s management had confirmed that the casino operator had been able to generate earnings before interest, taxation, depreciation and amortisation (EBITDA) that was “comfortably north of HKD1 billion” (US$127.4 million) in the quarter to date.
“This represents about 45 percent of recovery versus pre-Covid levels, which we find very encouraging,” the JP Morgan team wrote.
Galaxy Entertainment posted negative EBITDA of HKD163 million for the fourth quarter, still an improvement over the negative EBITDA of HKD581 million recorded in the previous quarter. The result compared with positive EBITDA of HKD1.04 billion in the final quarter of 2021.
This year, part of the positive EBITDA performance for the quarter to date was related to Galaxy Entertainment’s strong business during January’s Chinese New Year holiday period. “Its mass gross gaming revenue (GGR) recovered to over 100 percent of 2019 Chinese New Year’s, having gained share from most of its competitors,” suggested JP Morgan.
In January, Macau’s market-wide casino GGR reached MOP11.58 billion (US$1.43 billion), up 232.6 percent month-on-month. The Chinese New Year holiday period for mainland China spanned January 21 to January 27 this time.
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"The six Macau casino operators should not be penalised for upping expenditure on player incentives, so long as their EBITDA margins are not materially diluted”
George Choi and Ryan Cheung
Analysts at Citigroup