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China – Galaxy warns that trade fall out will dent revenues

By - 29 October 2018

Galaxy Entertainment Group continued to enjoy growth in Macau with gross gaming revenue in the latest quarter also increasing by six per cent year-on-year, reaching $2.014bn despite the effects of typhoon Mangkhut which hit Macau on September 16.

The operator warned though that the trade fall out between China and the US, rising interest rates and a slowing economy would all impact its results in the short term.

Mass table revenues increased by eight per cent year-on-year reaching $841.7m whilst VIP revenues climbed five per cent.

Dr. Lui Che Woo, Chairman of GEG said: “Despite increased competition, with new property openings both in Macau and regionally, GEG delivered solid results with Q3 Adjusted EBITDA growing 10 per cent year-on-year to $3.9bn. It should be noted that during the quarter gaming operations played unlucky which reduced EBITDA by approximately $0.3bn.

Additionally Macau experienced adverse impacts from both the World Cup in July and typhoon Mangkhut in September. We continue to drive every segment of our business with a particular focus on yielding our resorts. GEG’s renowned ‘World Class, Asian Heart’ service combined with our differentiated resorts offerings have resulted in our portfolio of hotels reporting virtually full occupancy.”

“The continued growth in the rapidly emerging and under penetrated middle-class in Mainland China and their demand for leisure and travel gives us confidence in the longer term outlook for Macau. However, I do acknowledge that the current international trade tensions, rising interest rates and a slowing economy may impact consumer sentiment in the short term.”

Both Galaxy Macau and StarWorld posted revenue increases of seven per cent with Galaxy Macau reaching $9.3bn whilst StarWorld generated $2.9bn. Galaxy said that both properties ‘played unlucky’ lowering EBIDTA by $323m and $5m respectively in the third quarter.

Galaxy continues to move forward with Phases 3 & 4 of Galaxy Macau, which will include approximately 4,500 hotel rooms, including family and premium high end rooms, 400,000 square feet of MICE space, a 500,000 square feet 16,000-seat multi-purpose arena, F&B, retail and casinos, among others.

“We look forward to formally announcing our development plans in the future,” Dr. Lu said.

Union Gaming analyst Grant Govertsen is expecting a delay on its completion. “While design work continues to move forward on Phase 4, construction on Phase 3 has largely maxed out for the time being as the company waits on various government approvals,” he said. “With this in mind, it appears that Phase 3, including the first batch of hotel rooms, is unlikely to come online before mid-2020.”

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