Macau concessionaire Galaxy Entertainment Group (GEG) is looking to bring forward the opening of Galaxy Macau Phase 4 by one year to 2026, but has revised down the expansion project’s room inventory by some 900 rooms, according to financial services group Jefferies.
In a Monday note following a recent road trip with GEG management, Jefferies noted that Phase 4 had originally been planned for a 2027 opening but the company was hopeful of an earlier launch following a series of delays to the opening of Galaxy Macau Phase 3.
Phase 4 was to include 2,500 additional rooms – taking the total capacity of the Cotai integrated resort to 7,500 – but according to Jefferies analyst Andrew Lee this has now been revised down to 1,600 “larger and higher quality rooms”. GEG has previously stated its intention to target the lucrative premium mass segment as part of its Phase 3 and Phase 4 developments.
Separately, Lee said he expects GEG to issue higher dividend payouts in the medium to long term, supported by the company’s strong financial position and a rebound of earnings back to 2019 levels.
“We believe the company could raise its dividend payout ratio (historically ~30%) in the medium to longer term given its net cash position, lower capex, and positive FCF (free cash flow),” he wrote, pointing to GEG’s HK$12 billion (US$1.53 billion) in net cash and HK$13.2 billion (US$1.69 billion) in cash and bonds.
“Earnings continued to improve into 3Q23, in-line with higher sector monthly gaming revenue, with Phase 3 likely to drive future earnings potentially close to 2019. Average bets have increased each quarter but remain ‘single-digit lower’ than pre-COVID.”
Lee said GEG is enjoying good traction in premium mass with the average length of stay of these players increasing from 3.1 days to 3.3 days. Likewise, only 12% of Galaxy’s GGR is being generated through VIP, primarily via direct VIP and non-mainland China-based players. This compares with the sector-wide average of 15%.
“We expect earnings to continue improving from sector GGR recovery, as Macau remains the overseas destination of choice, and premium mass tables back to pre-pandemic numbers post-Raffles opening,” Lee said.
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