Bloomberg News

Galaxy Entertainment First-Half Profit Surges on New Resort

August 27, 2012

Galaxy Entertainment Group Ltd. (27)’s first-half profit climbed nine fold after the Macau casino operator drew more Chinese visitors to a gambling resort it set up last year.

Net income for the six months ended June rose to HK$3.45 billion ($445 million) from HK$378 million a year earlier. Adjusted earnings before interest, taxes, depreciation and amortization, or Ebitda, surged to HK$4.7 billion from HK $1.8 billion for the six months.

The company opened the Galaxy Macau resort on the city’s Cotai strip in May last year. It plans to invest HK$16 billion to almost double the size of that gambling center in the Chinese city to compete with rivals including Sands China Ltd. (1928), Wynn Macau Ltd. (1128) and Melco Crown Entertainment Ltd. (6883) First-half revenue doubled to HK$28.3 billion.

“The profit jump was largely due to the contribution of Galaxy Macau,” said Chief Financial Officer Robert Drake in a telephone interview after the earnings announcement. “Our resorts will continue to ramp up.”

Galaxy shares fell 3.3 percent to HK$21.75 at the 4 p.m. close in Hong Kong. The benchmark Hang Seng Index dropped 0.41 percent.

Mass Market

“Galaxy will be likely to see continuous improvement in the mass market business, benefiting from a ramp-up of its integrated resorts,” said Grant Govertsen, a Macau-based analyst at Union Gaming Research ahead of the earnings announcement.

Mass market revenue growth will outpace high-stakes gambling, or the VIP business, for the next two to three years, according to Govertsen. The slower Chinese economy will hurt VIP operations more than the mass market, he said.

The planned Galaxy Macau expansion will add up to 500 gaming tables, luxury stores and 1,300 rooms from the JW Marriott and the Ritz-Carlton hotels.

Casino operators are expanding even as revenue growth slows in the Chinese city. Macau gambling revenue rose 1.5 percent to 24.6 billion patacas in July, the smallest gain since 2009, on easing demand and the effects of a typhoon. China’s gross domestic product grew 7.6 percent in the second quarter, the slowest since 2009.

To contact the reporter on this story: Vinicy Chan in Hong Kong at vchan91@bloomberg.net

To contact the editor responsible for this story: Anjali Cordeiro at acordeiro2@bloomberg.net


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