3Q23 largely in line; 4Q23 continues to grow market share
- In 3Q23, Galaxy Entertainment Group (GEG) posted 374% y-o-y revenue growth to HK$9.7bn (+11% q-o-q) and 576% y-o-y. Adjusted EBITDA growth to HK$2.8bn (+12% q-o-q), largely in line.
- Specifically, mass gaming revenue of the Galaxy Macau integrated resorts reached 121% versus pre-covid level of 3Q19.
- Net cash stood at HK$23.3bn as of Sep 2023, the best amongst peers. We maintain BUY with TP of HK$62.31
Sound macros. Macau’s Gross Gaming Revenue (GGR) for 3Q23 reached HK$47.4bn, up 780% y-o-y and up 7% q-o-q, with mass gaming revenue contributing to 74% of GGR. Visitor arrivals to Macau also surged by 821% y-o-y to 8.3m during the quarter, or up 24% q-o-q, inclusive of 5.8m Mainland visitors (+628% y-o-y; +35% q-o-q). Total visitor arrivals for the National Day Golden Week holiday (29 Sep – 6 Oct 2023) reached 932,365, with a daily average at c.84% of the corresponding period in 2019 and continued to show a good recovery.
Promising outlook. GEG’s 3Q23 mass gaming revenue reached c.102% versus the pre-covid level of 3Q19, including Galaxy Macau at 121% of 2019 levels, and StarWorld Macau at 71% of 2019 levels. Retail sales also saw demand normalized post re-opening, seeing mall rental of $379m, up 114% versus 2019 levels. The launch of Raffles at Galaxy Macau (450 suites) in Jul 2023, and Andaz Macau (700 rooms, with currently 300 in operations and the rest by CNY 2024) in Sep 2023 had lifted the company’s hotel inventory to c.5,000 rooms, supporting better growth prospects ahead, with management confirming about GEG’s market share gains in 4Q23 so far (3Q23: 18.5%). Lately, the company has signed up with various entertainment group and will host a number of spectacular events & concerts in the coming months. It also continues to develop Phase 4, which will include multiple high-end hotels, 4,000 audience theatre, extensive F&B, retail, landscaping and a water resort deck, scheduled to complete by 2027 with the actual timeline to be adjusted according to demand. GEG has already opened overseas offices in Tokyo and Seoul earlier this year, and will roll-out one more in Bangkok in due course to further tap international travelers.
3Q23 performance at a glance:
- 2Q23 Group Net Revenue of HK$9.7bn, up 374% y-o-y and up 11% q-o-q, inclusive of key contributions from Galaxy Macau’s HK$7.6bn (+612% y-o-y; +16% q-o-q) and StarWorld Macau’s HK$1.2bn (+677% y-o-y; flattish q-o-q).
- Group Adjusted EBITDA of HK$2.8bn, up 576% y-o-y and up 12% q-o-q, inclusive of Galaxy Macau’s HK$2.6bn (+957% y-o-y; +18% q-o-q) and StarWorld Macau’s HK$347m (+305% y-o-y; -4% q-o-q).
- Played unlucky in 3Q23 which decreased Adjusted EBITDA by c.HK$122m, with normalized Adjusted EBITDA of HK$2.9bn, up 615% y-o-y and up 17% q-o-q. This included Galaxy Macau’s HK$2.7bn (+1,061% y-o-y; +24% q-o-q) and StarWorld Macau’s HK$351m (+308% y-o-y; -3% q-o-q).
- Hotel occupancy rates for Galaxy Macau reached 98% across the seven hotels, and for StarWorld Macau reached 100%
- In 3Q23, Broadway Macau saw Adjusted EBITDA of -HK$14m (3Q22: -HK$16m; 2Q23: -HK$10m in 2Q23). City Clubs saw Adjusted EBITDA of HK$5m (+119% y-o-y; +25% q-o-q). Construction Materials Division saw Adjusted EBITDA of HK$164m (+40% y-o-y and -28% q-o-q).