Jefferies predict higher divedend payout from Galaxy Ent

October 5, 2023 Macau Casino & Hotel

The solid financial condition of Macau casino operator Galaxy Entertainment Group Ltd, as shown by net cash and free cash flow, according to Jefferies Hong Kong Ltd, may, in the medium to long term, result in a greater dividend distribution.

The casino company now has HKD 13.2 billion (US$1.53 billion) in cash and bonds and HKD 12 billion (US$1.53 billion) in net cash. In the past, Galaxy Entertainment has kept its dividend payment ratio at about 30%. However, the firm may be able to increase its dividend payment ratio given its net cash position, lower capital expenditures, and positive free cash flow.

The management of Galaxy Entertainment is upbeat about the prospects for Macau, with profits likely to increase to levels seen in 2019. The company’s workforce is anticipated to stay below the 21,000 workers it had in 2019, but it must contend with pay inflation since employees make up around 80% of operating expenses.

In 2024, the business anticipates that the addition of the Horizon Premium Club and the Raffles at Galaxy Macau hotel—two new amenities—from Phase 3 of its storied Galaxy Macau property—will be crucial differentiators. According to the management of the firm, the player profile in Macau has evolved, with a bigger proportion of players from regions other than Guangdong province, tourists who are more family-oriented, and mass players who are younger in age.

The total number of hotel rooms at Galaxy Macau has expanded to 5,000 as of the third quarter of this year with the inauguration of Phase 3 hotel towers. Originally slated to debut in 2027, Phase 4, which incorporates gambling, is now anticipated to launch in 2026, with 1,600 bigger and higher-quality rooms planned.

Jefferies anticipates that once Macau’s total gaming revenue rebounds and the group’s premium mass tables reach pre-pandemic levels after the launch of Raffles, Galaxy Entertainment’s profitability will keep rising. The brokerage projects that the business will make a total of HKD 34.63 billion in 2023 and HKD 37.59 billion in 2024, with a HKD 8.23 billion and HKD 9.97 billion net profit, respectively.

In comparison to the same time in 2022, Galaxy Entertainment recently recorded a first-half profit of HKD 2.89 billion as opposed to a deficit of HKD 850.47 million. A special dividend of HKD 0.20 per share, payable on October 27, was also announced.