Gaming | Galaxy profit falls 25 pct as anti-graft drive hurts VIP sector

A porter escorts guests in a vehicle through the lobby of the Galaxy Macau casino resort

Galaxy Entertainment Group Ltd. reported earnings fell by a quarter as China’s anti-corruption campaign deterred high-stakes gamblers from entering Macau. It’s the last casino operator in the city to report fourth-quarter results.
Adjusted earnings before interest, taxes, depreciation and amortization, or adjusted Ebitda, fell to HKD2.7 billion (USD348 million) from a year ago, the casino operator controlled by billionaire Lui Che Woo said in a statement yesterday. This is in line with the HK$2.78 billion median estimate of eight analysts surveyed by Bloomberg News. Galaxy’s stock pared gains.
“The anti-corruption activities mean a lot of VIPs will not be going anywhere near Macau soon,” said Tim Craighead, head of Asian research at Bloomberg Intelligence in Hong Kong. The industry may face another 8 percent drop this year, a Bloomberg survey showed, after last year’s 2.6 percent fall.
Macau’s economy shrank 17.2 percent in the fourth quarter after casino revenues slumped, as China’s anti-graft campaign led high rollers such as officials and senior executives to avoid the world’s biggest gambling hub. China’s economic slowdown, a smoking ban and stricter rules for travelers are among the reasons that have hurt Galaxy’s mass-market business, Craighead said.
Galaxy pared gains to rise 2 percent as of 1:39 p.m. in Hong Kong trading, after the shares jumped as much as 4.1 percent before the results were announced. The stock has slumped 19.6 percent so far this year, against the Hang Seng Index’s 3.2 percent gain. Sands China Ltd. reported fourth-quarter adjusted Ebitda fell 15 percent in the period, while that at Wynn Macau Ltd. plunged 36 percent.
The Hong Kong-based company said it plans to pay a special dividend of HK$0.28 per share, totalling about HK$1.19 billion ($153.4 million). It had paid out special dividends of about HK$4.9 billion in 2014.
The second phase of Galaxy Macau and Broadway at Galaxy Macau are both on schedule to open on May 27, the company said, recreating New York’s famous theater district to woo more vacationing Chinese customers. This takes Galaxy’s Cotai investment to HK$43 billion of a total planned HK$100 billion, according to the statement.
It will be the first among a slew of new projects opening in Macau’s Cotai Strip, including Melco Crown Entertainment Ltd.’s Studio City casino resort, as operators target to draw more mass market tourists as Chinese President Xi Jinping urged the city to diversify away from casinos.
The new supply of casino resorts should grow the mass market and VIP businesses, Citigroup Inc. analysts led by Anil Daswani wrote in a note on March 16.
“We continue to believe in our thesis, as ’supply drives demand’ has been holding true in Macau, Las Vegas, Singapore and Hong Kong historically,” the Citigroup analysts wrote.
They expect Macau’s gross gaming revenue to rebound in the second half of 2015, while still predicting a 16 percent full- year decline. Daryl Loo and Billy Chan, Bloomberg