CASINO

Galaxy Entertainment profit falls 20% but Macau expects boffo August

TAGs: Galaxy Entertainment Group, Genting Berhad, Macau

galaxy-entertainment-macauGenting Bhd. reported a 9% drop in Q2 profit, in part based on high rollers getting luckier than usual at Genting Singapore’s Resorts World Sentosa. Profits were also down at Genting’s UK casino division. The Malaysian company, which controls Asia’s second largest casino outfit by market value, is hoping VIPs go cold in both jurisdictions, and has high hopes for its Resorts World New York operation, set to open in Q4, and Resorts World Miami, which was just announced in May.

Galaxy Entertainment Group Ltd. saw H1 profit drop 20% over the same period last year. While revenue rose 50% to HK $13.67b, net profit for the six months ending June 30 was HK $373.8m (US $48.5m), compared to HK $475m in 2010. Blame for the downturn goes to the HK $800m in one-time costs associated with the May 15 opening of Galaxy Macau, but considering their new joint helped boost their market share by 10% in just three months, we figure they don’t mind a little short-term pain.

Thursday will see the release of Macau’s revenue figures for the month of August, and analysts are expecting yet another US $3b+ month. Nomura Holdings Inc. suggested August revenue could be as much as 60% higher than the year before. That alone was enough to send shares of Sands China Ltd. up 3.7% on Hong Kong’s Hang Seng index.

Macau’s red-hot economy isn’t all gravy, however. The inflation rate hit 5.96% in July, and many longtime Macau residents are finding it increasingly difficult to afford upwardly spiraling rents. Local companies not involved in the gaming business are having trouble finding new workers and are compelled to offer existing employees double-digit percentage raises each year in order to retain them. The influx of foreign workers (another 30k expected to arrive this year, according to a local economist) to fill the gap sparked a minor riot last year, requiring police to break out the water cannon and pepper spray. Could Macau’s red-hot market use a little cooling off?

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