Hong Kong-listed casino operator Galaxy Entertainment Group (GEG) posted record earnings in Q1 2013, thanks to a serious boost in mass market table games revenue. GEG reported revenue of HKD15.2b (US $1.96b) up 15% year-on-year and 6% quarter-on-quarter. Earnings hit a record HKD2.8b ($360.7m), up 29% year-on-year and 10% sequentially.
GEG chairman Lui Che-woo made an early contribution to the Understatement of the Year competition by saying 2013 has “started well” for his company, which operates the Galaxy Macau, StarWorld Macau, four City Clubs casinos and recently agreed to acquire the Grand Waldo Complex for HKD3.25b ($419m). GEG also humble-bragged that its balance sheet “remains healthy” with HKD16b ($2.06b) cash on hand and a net cash position of HKD5.4b ($695.7m). GEG is set to join Hong Kong’s benchmark Hang Seng Index effective June 17, 2013.
Revenue at GEG’s flagship property Galaxy Macau was up 23% to HKD8.9b, while earnings rose 48% to HKD1.9b, the casino’s seventh consecutive quarter of earnings growth. Mass market gaming table drop rose 14%, but hold increased from 27.1% to 33.8%, pushing mass table win up 42% to HKD2.3b, easily outstripping the market average of 30%. Turnover at VIP tables fell 2%, but hold increased from 3% to 3.5%, pushing win up 15% year-on-year. Electronic gaming hold fell 1.1 points to 5.8%, but handle rose 42%, allowing net win to rise 20%. Galaxy Macau also enjoyed “an impressive” 95% hotel room occupancy in Q1.
Over on Macau’s peninsula, StarWorld posted its second highest quarterly earnings, up 33% quarter-on-quarter to HKD861m. Once again, the mass market ruled the day, with table drop up 11% and hold rising 6.6 points to 29.6%, pushing win up 42% year-on-year, 14% sequentially. The VIP tables saw turnover fall 15%, but hold rose 0.5 points to 3.2%, allowing win to rise 1%. Electronic gaming handle was off 3% but hold rose 0.5 points to 7.1%, boosting win by 3%. Starworld enjoyed a 98% occupancy rate in Q1. City Clubs’ earnings rose 7% to $36m.
With the mass market driving earnings, GEG’s stated intention to focus Galaxy Macau’s next phases on the premium mass crowd looks particularly astute. Phase 2 is already under construction with a mid-2015 opening date and GEG expects to break ground on Phases 3 & 4 before the year is out, with a phased opening planned for between 2016 and 2018. Despite the fact that their VIP haul had more to do with better luck than increased volume, GEG claim to see “positive signs that demand in the VIP segment is regaining momentum” after slumping badly in mid-2012 ahead of the once-a-decade change in China’s leadership.
