GALAXY 3Q CONF CALL NOTES

Another big Q for a Macau operator.  Galaxy Macau on schedule


“The third quarter was another record quarter for GEG, outperforming the market with outstanding gaming growth and strong results from all of our businesses. Our absolute focus on “World Class, Asian Heart” service and meeting the particular needs and tastes of Asian customers has enabled StarWorld to continue to lead the market. The Macau market continues to grow very rapidly and infrastructure projects in China and Macau are expected to maintain this growth and attract a new type of visitor to Macau, who will stay longer and, as well as gaming, look to enjoy entertainment and leisure facilities. The accelerated roll-out schedule of Galaxy Macau™ will enable the Group to fully capture this surging demand. Galaxy Macau™ remains on budget and on schedule to open in early 2011, a time at which we see an exceptional window of opportunity to introduce a large and truly Asian destination resort to the rapidly growing Macau market. The fit out of the property and recruitment of property staff signals the project’s transition from the construction phase to the exciting preopening of the property.”

-Dr. Lui Che Woo, Chairman of Galaxy Entertainment Group

 

HIGHLIGHTS FROM THE RELEASE/PRESENTATION

  • Galaxy Entertainment Group reported record EBITDA up 115% YoY to HK$616MM; StarWorld reported record EBITDA up 161% YoY to HK$568MM - 9th consecutive Q of growth
  • StarWorld VIP win% in 3Q was 3.1%,compared favorably to 2.3% in the third quarter of 2009
  • StarWorld EBITDA margin of 21%, lower than the 23% in Q2
  • StarWorld RC Volume rose 69% YoY to HK$137BN; VIP Revs up 129% YoY; Mass Revs up 35% YoY; Slot Revs up 67% YoY
  • "Galaxy Macau™ is the only new resort destination set to open in Macau until at least the end
    of 2011"
    • Accelerated opening with 1,400 rooms
  • $1.9BN Cash on Hand; total debt increased from $3.4BN to $4.8BN QoQ 

 

CONF CALL NOTES

  • Mass volume $1.8BN, up 20% YoY
  • City Club EBITDA $43MM beat company projection of  $20-25 EBITDA per quarter
  • Galaxy Macau will have 50 F&B outlets
  • Thru Sept 30, have invested a little over $7BN in Galaxy Macau

Q&A 

  • October trends: should be record month for Macau market; StarWorld held very poorly
  • StarWorld EBITDA margin declined in Q3 due to different mix of business in VIP (rev share/RC share arrangements)
  • Have completed recruitment of Galaxy Macau mgmt team
  • Have not started the hiring of mass workers
  • Galaxy Macau marketing plans: launched newsletter and expanded awareness through social media outlets; advertising program and travel agency programs doing well in Guangdong province
  • Galaxy Macau
    • VIP/Mass table mix: 2/3 mass, 1/3 VIP
  • Capex invested: $1.6 BN in Q3; remaining capex for Galaxy Macau: bulk will be in 1Q/2Q 2011
  • Departure of Galaxy Macau executives: don't worry