Galaxy Takes the Plunge

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Numbers expected to improve in 2016

Galaxy Entertainment Group has posted a 46 percent year-on-year decrease in second-quarter earnings. Adjusted EBITDA was HK$1.9 billion (US$245 million) from 2014, the company announced.

The decline was due in part to higher operational costs from Galaxy’s new resorts on Macau’s Cotai Strip. In May, the company debuted the $3.1 billion expansion of its Galaxy resort and Galaxy Broadway—the first of several new megaresorts to open in the midst of a record-breaking slump in the gaming industry. The Galaxy resorts, conceived before the beginning of the historic downturn, opened with a total of three new hotels including a Ritz-Carlton; a casino; 100,000 square meters of gross retail area; and a 3,000-seat theater. While Galaxy had room for 500 gaming tables and hoped for 400, it received permission to install just 150.

However, Galaxy Chairman Lui Che Woo said the market has “almost hit the bottom” and should end in the second half of 2015.

“Demand for the gaming sector in Macau is quite limited now,” Chris Kwai, analyst at China International Capital Corp. told Bloomberg News. He doesn’t expect new properties to improve the situation. Though the industry may see a 30 percent drop in revenues this year, it could come back with a 4.5 percent gain in 2016, according to 10 analysts surveyed by Bloomberg.

The next resort in line to open on Cotai is Melco Crown’s $3.2 billion Studio City resort, scheduled to debut October 27. Wynn Macau Ltd. will open its Wynn Palace next March. Sands China will open its $2.7 billion Parisian Macao opening in about a year. Eventually, said Kwai, it could all pay off.

“Individual new openings will not bring too much of an upside in the entire market, but once it adds up all the casinos next year, people will be more fond of going to Macau.”

Meanwhile, according to GGRAsia, SJM Holdings Ltd. says it may reopen Casino Jai Alai in Macau in “mid-2016” to serve a mass-market clientele, said a note from brokerage Sanford C. Bernstein Ltd.