Macau casino operator Galaxy Entertainment Group saw a 78 percent surge in revenue in the fourth quarter of 2009 compared to a year earlier.
Quarter on quarter, the increase represented a 57 percent jump in revenue. The news comes at a fortuitous time for the company. It must deal with USD120 million in debt maturity during 2010, although it does hold USD490 million in cash. Galaxy is also expected to announce within a month the results of negotiations on finance to complete its Cotai resort, branded Galaxy Macau. The project was put in to what amounts to suspended animation early in 2009. That was part of Galaxy’s cautious fiscal approach to a then bearish market during the global financial crisis sparked by the collapse of Western credit markets.
Union Gaming Research said recently it estimated Galaxy will raise approximately USD550m for Galaxy Macau’s completion, though it said up to USD200 million of that could be held as operational capital rather than being sunk into the infrastructure.
Galaxy appears to have ruled out using convertible bonds or a new share placement, and is thought to be looking at options including syndicated loans, high-yield bonds or a mix of both.
An announcement on funding for Galaxy Macau will need to come soon if the company is to keep to its timetable—declared in November last year—of opening the HKD14.1 billion (USD1.81 billion) 2,200-room property by the first quarter of 2011.
The record figures for Galaxy came in what is a generally rising Macau gaming market. They appear to support the views of some analysts that a recent easing of credit issuance for Chinese VIP gamblers is creating a heating effect in the local economy. Macau as a whole scored a best ever 36.16 billion patacas in revenue in Q4 2009.
Whether the tigerish growth can continue and, more importantly, whether it will be allowed to by the central authorities in Beijing is uncertain. At least one operator has already indicated to analysts that so much credit has been issued that gambling credit default risk could play an increasing role in the Macau market and create some pressure for operators.
Nonetheless, during Q4 ’09, hefty turnover from high-roller players pushed revenues at Galaxy’s flagship StarWorld Hotel & Casino to HKD3.46 billion (USD440 million).
Sales of VIP gambling chips rose 83 percent from a year ago and 21 percent from the previous quarter to HKD98 billion, Galaxy said in its preliminary results.
StarWorld said it won back an improved 3.1 percent of those chip sales, producing net VIP winnings of HKD3 billion. Mass market table revenue was HKD271 million.
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