Galaxy optimistic despite warnings of no ‘v-shaped’ recovery for Macau

TAGs: Galaxy Entertainment Group, Macau

galaxy-entertainment-macau-no-recoveryMacau casino operator Galaxy Entertainment Group (GEG) saw profits fall two-thirds in H1 2015, a result the company called “credible” given the market’s “challenging environment.”

Revenue in the first six months of the year fell 34% to HKD 25.4b (US $3.27b), while adjusted earnings fell 43% to HKD 4.2b and net profit fell 66% to HKD 2b. Profit was laid low by HKD 1b in non-recurring charges related to the opening of Galaxy Macau’s Phase Two as well as gaming operations having “played unlucky,” which reduced profits by HKD 265m.

Galaxy Macau’s Phase Two was only open for 35 days in H1 but GEG says the launch was “well received” and “the majority if not all” of the property’s gaming and retail offerings will be open before the year is through.

GEG’s flagship property reported revenue down 31% to HKD 17.2b in H1, while earnings fell 41% to HKD 3.2b. VIP turnover was down 43% and net win fell 40% to HKD 8.3b, as hold fell 0.4 points to 3.2% in the second quarter. Galaxy Macau’s mass market table drop fell a comparatively mild 12% while net win was down 15% to HKD 3b. Electronic gaming revenue fell 13% to HKD 694m and non-gaming revenue dipped 15% to HKD 853m.

StarWorld Macau revenue and earnings were both down 42% to HKD 7.1b and HKD 1.1b respectively, as VIP turnover dipped 54%, mass table drop fell 17% and slots handle fell 43%. The revamped Broadway Macau was also only open for 35 days in H1, but it reported gaming revenue of HKD 41m.

GEG says it remains optimistic about Macau’s medium and long-term prospects, but Daiwa analysts are warning that operators’ hopes for a “v-shaped” recovery are unrealistic. Daiwa recently revised its forecast for Macau’s year-on-year gaming revenue decline in 2015 from 21% to 34%.

Daiwa analyst Jamie Soo said his firm rejects the prevailing wisdom among casino operators that the lure of new resorts like Melco Crown Entertainment’s Studio City will boost traffic to Macau. Soo sees “no fundamental basis to support a turnaround” in Macau’s fortunes, despite operators’ attempts to shift their focus from VIP gaming to the mass market.

Soo said China’s recent devaluation of the yuan will take a toll on the mass market sector, resulting in “a direct reduction in the size of customers’ gaming wallets and impaired liquidity channels.”


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