Galaxy reports solid 16H1 profit, in-line with estimates

Galaxy Entertainment Group Ltd has reported first half profit up 26 percent year-on-year, citing a rise in non-gaming revenue and casino market share as a result of new resort openings.

According to a filing to the Hong Kong Stock Exchange on Thursday, the casino operator reported net profit of HK$2.6 billion ($335.31 million) for the first half of 2016.

Group revenue rose 1 percent, with revenues generated from VIP-room gaming tables down 15 percent year-on-year to HK$13.2 billion, offsetting the gains made from main-floor tables, which brought in HK$10 billion in revenue, up 22 percent.

Galaxy Entertainment Group, which operates the Galaxy Macau and StarWorld casinos, said it saw adjusted EBITDA jump 13 percent to HK$4.7 billion, beating analyst estimates.

In its filing, the operator said it remained optimistic about Macau’s prospects in the medium term, saying that it saw signs of stabilization in the broader mass market.

“The first half of 2016 was encouraging for Macau and we continued to see gradual signs of stabilisation, as it diversifies, and the shift towards mass segment continues.”

“While we do acknowledge there might be increased competition with the opening of additional properties in Cotai, we are hopeful that the new properties will also be a catalyst for increased visitation and increased length of visitor stay,” the company added.

Union Gaming analysts said the results were solid for Galaxy, with mass market showing positive momentum.

“Galaxy seems to be hitting its stride with respect to getting the mass story right at the right time with an increased focus on non-premium mass. Significant reconfigurations of both Galaxy’s and StarWorld’s mass market floors post 16Q2 suggest we should see continued follow-through into Q3 and should provide a good defense against new supply,” said the brokerage.

The company said the shift towards the mass segment will continue, which will be supported by improved infrastructure, including the Hong Kong-Zhuhai-Macau Bridge, the Taipa Ferry Terminal and the extension of the train line connecting Zhuhai to the Lotus Bridge in Hengqin, a project that will significantly improve access to Cotai.

“We expect these factors to combine in the short to medium-term to drive increased overnight visitor numbers, whom stay longer, and have a higher non-gaming spend,” said the operator.

The company also added that site preparation works for the third and fourth phases of Galaxy Macau could start in late 2016 and 2017 respectively.