CLSA: Genting “well-placed” for Japan
Galaxy Entertainment Group hopes to be one of the first global gaming operators in Japan, says company founder and Chairman Lui Che Woo.
During Galaxy’s 2016 earnings call last month, Lui said the company already has an office in Tokyo and will be ready to go when Part II of a two-tiered gaming bill passes in Japan; the enabling bill passed in December.
Lui also noted that his family’s Hong Kong-based building materials firm K. Wah Group Ltd. already has strong alliances with Japanese companies and should not have to hunt for local partners.
“We have a relationship with Japan’s industrial players for over 50 years and we will seek cooperation opportunities to do a big project in Japan,” Lui said. Partnerships with domestic companies will be important for foreign operators who want to get into Japan—and the list is long, as analysts estimate the jurisdiction could become the world’s second largest gaming market, generating from $20 billion to $40 billion per year.
Analysts Vitaly Umansky, Zhen Gong and Yang Xie of brokerage Sanford C. Bernstein Ltd. said it’s too early assess Galaxy’s chances, and added that while the company is strong in Macau, “it will face very strong competition from other more global competitors.
“A Chinese, Macau-only, operator may not be a top choice for Japan,” the analysts wrote.
Would-be rivals include the Las Vegas Sands Corp., MGM Resorts International, Melco Crown Entertainment Ltd. and Genting Singapore Plc.
Genting may have an edge on Galaxy when it comes to Japan. According to brokerage CLSA, the Malaysian giant “has sufficient financial resources and is well placed to bid for this opportunity.”
“Genting Singapore has completed a study of its capital structure, and over the next three years will execute a corporate finance strategy that fulfills its various investment requirements including IR projects, and yet maintaining an efficient capital funding model,” CLSA said.
Meanwhile, Galaxy posted impressive numbers for 2016, with annual profits of HKD6.28 billion (US$809.1 million), up 51 percent from the prior year, reported GGRAsia. The company said it expects to begin construction on Phases III and Phase IV of Galaxy Macau the Cotai district “in late first quarter or early second quarter of 2017.”
Lui attributed the spike in profits to tighter cost controls. Full-year group adjusted earnings before interest, taxation, depreciation and amortization increased 18 percent year-on-year to HKD10.3 billion.
“We have worked hard during the period to carefully control costs without adversely impacting customer service standards and to substantially grow our mass market business,” said Lui in a news release.
Total gaming revenues in 2016 reached approximately HKD49.5 billion, up by 2 percent from the previous year, said the company. Revenue from mass table games was HKD21 billion, an increase of 19 percent year-on-year, while VIP revenue declined by 8 percent to HKD26.5 billion.
For the full year, mass gaming table drop at Galaxy Macau was up 19 percent to HKD32.05 billion, but VIP table games turnover decreased 12 percent year-on-year to HKD490.69 billion. Electronic gaming revenue at Galaxy Macau was up 8 percent year-on-year to HKD1.73 billion. Non-gaming revenue at Galaxy Macau was up 21 percent at HKD2.80 billion; referring to the upcoming expansion of Galaxy Macau, the firm said the development would have “a significant focus” on non-gaming especially meetings, conferences and exhibitions, entertainment and family attractions.
