CASINO

Lady luck lifts Galaxy Ent H1 net profit

TAGs: EBITDA, Galaxy Entertainment Group, Macau

Net profit of Hong Kong-listed casino operator Galaxy Entertainment Group Ltd. (GEG) rose by 81 percent in the first half of the year as lady luck continues to smile upon its overall gaming operations.

GEG announced to the Hong Kong bourse on Thursday that the firm reaped HKD4.63 billion (US$591.7 million) profit in the six months ending June 30, compared to nearly HKD2.56 billion ($327.13 million) in the prior-year period.

GEG’s revenue likewise grew 12 percent to HKD28.5 billion ($3.64 billion) year-on-year while adjusted EBITDA rose 37 percent to ($830.6 million).

“During 1H 2017, GEG experienced good luck in its gaming operations which increased Adjusted EBITDA by approximately $20 million,” the casino operator said in its financial report.

Lady luck lifts Galaxy Ent H1 net profitInvestment analysts, however, believe that GEG’s net profit growth is not simply pure luck.

Union Gaming analyst Grant Govertsen pointed out that the mass market sector continues to be GEG’s sweet spot while the firm’s EBITDA exceeded their forecast by 5 percent.

GEG’s total mass table game revenue was HKD11.4 billion ($1.46 billion), up 15% year-on-year, while total VIP revenue rose 5% to HKD13.9 billion ($1.78 billion).

Total electronic gaming revenue gained 12% to $1.1 billion ($140.5 million).

“We would expect the company’s VIP performance to continue to improve on a sequential basis and are modeling as such,” Govertsen said in his note. “Mass market continues to be the sweet spot for the company, the seventh consecutive quarter of double-digit growth in this segment.”

Morgan Stanley echoed Union Gaming’s statement that GEG’s first-half EBITDA was above its two percent estimate.

Despite experiencing “bad luck” in its gaming operations, Galaxy Macau’s first half revenue grew 8 percent to HKD20.1 billion ($2.57 billion). VIP rolling chip volume was HKD264.7 billion ($33.82 billion), up 8 percent year-on-year, while VIP revenue inched up 1 percent to HKD9.9 billion ($1.27 billion).

Union gaming has raised its estimates for GEG to reflect trends seen in 2Q17 and ongoing sequential improvements in the company’s underlying business (both VIP and mass).

“We continue to be very impressed with Galaxy’s mass operations (both at Galaxy Macau in Cotai and StarWorld on the peninsula) based on our numerous on-the-ground observations. The levels of mass foot traffic at Galaxy Macau have been exceptional (potentially rivaling its neighbor the Venetian), driven in part by the company’s ongoing efforts to rethink the property from both a gaming and non-gaming perspective (especially F&B),” Govertsen said.

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