not vested
Luck Shines Upon Galaxy Entertainment By Shuli Ren
Galaxy Entertainment (27.Hong Kong) soared 3.1% on Wednesday, the second most traded stock in Hong Kong, after the Macau casino operator reported
better-than-expected December quarter earnings.
In the December quarter,
gross gaming revenue grew 12% from the September quarter, above the overall market growth of 10%.
As a result, net revenue at Galaxy Entertainment rose 11% from the September quarter, while earnings before interest, taxes, depreciation and amortization gained 10% to 3 billion Hong Kong dollars.
With casino revenues in Macau plummeting thanks to Beijing’s anti-corruption crackdown and a slowdown in the Chinese economy, the gambling hub is seeking to reinvent itself as a family-friendly mass market destination as the high rollers stay away.
Investors were also encouraged by management’s more optimistic outlook on Macau.
However,
half of the earnings growth came from good luck. Bernstein Research‘s Vitaly Umansky wrote:
However, Galaxy EBITDA was helped by good luck across all three properties by HK$150mm. Hold-normalized EBITDA would have been HK$2.81 bn (+5% q/q hold-adjusted for both Q’s), a positive result but not as impressive as at first glance.
Union Gaming‘s Grant Govertsen likes Galaxy’s results nonetheless, saying the most exciting part about Galaxy’s results was its
mass gaming revenue, which grew 15% from a year ago (or 5% from September quarter).
Galaxy is disadvantaged in the new Cotai strip, because the area has added three new casinos in the last year. Meanwhile, Galaxy’s new Phase 2 casino is smaller than its competitors’ new casinos and is more an extension to its old wing than a brand-new casino.
Govertsen wrote:
Clearly Galaxy is hitting its stride as it relates to the all-important segment and we expect continued solid mass trends to continue for the company as we look to the rest of 2017 and into 2018.
We believe the company has hit all the right notes as it has not only reconfigured the gaming floors, but also when contemplating a major revamp of F&B particularly at Galaxy Macau (in addition to human resources, marketing programs, etc.).
The company will soon announce more detailed plans for Phases 3 and 4, which we expect to include more (much-needed for Galaxy) room supply as well as other non-gaming amenities.
This gives Galaxy an extended runway of growth in the out years – with Galaxy being the only Big 6 operator having the ability to meaningfully increase its supply following the current wave of development.
Source: Barron's Asia
http://blogs.barrons.com/asiastocks/201 ... rtainment/
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