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More records broken

"StarWorld has consistently outperformed the market during this and previous years, and today we report its tenth straight quarter of EBITDA growth. The property is fully capitalizing on the surging demand in Macau and delivering one of the strongest returns of any major casino in the world.  We believe that Galaxy Macau will be the only major new property to open in Macau in 2011, in what continues to be surging market conditions.  This game-changing property officially opens on Sunday May 15th, and we are now preparing for an extraordinary grand opening ceremony.”

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

HIGHLIGHTS FROM THE RELEASE

  • GEG 2010 record EBITDA HK$2.23BN (+92% YoY) and HK$625MM in Q4 (+76% YoY)
  • Starworld
    • Record EBITDA of HK$585MM in Q4
    • Q4 EBITDA margin: 23% (US GAAP)
    • Record VIP RC of HK$147BN in Q4
      • Q4 Hold: 2.8%
      • Net win: HK$4.1BN
    • Q4 Mass drop: HK$1.8BN
      • Q4 Hold: 17%
      • Net win: HK$320MM
    • Electronic Gaming: Q4 slot handle HK$ 869MM; Q4 Hold: 7.6% & win of HK$66MM
    • ROI of 61%
    • 2010 Occupancy: 97%; Q4 Occupancy: 99%
  • City Clubs: HK$158MM in EBITDA for 2010
    • 4Q EBITDA of HK$44MM
  • Construction Materials reported HK$348MM of EBITDA in 2010, a 38% YoY increase
    • 4Q EBITDA of HK$116MM
  • Galaxy Macau - Day one and eventual offereing
    • 450 tables and 1,100 slot machines (can expand to over 600 tables and 1,500 slot
      machines if needed)
    • 1,400 rooms and suites (of total 2,200 rooms and suites)
    • 50 F&B outlets
    • Grand Resort Deck with the world's largest skytop wave pool
    • As at 31 December 2010, the Group invested HK$9.0 BN (HK$14.9BN total investment estimates)
  • Galaxy Macau HK$600MM entertainment offering
    • Under construction; open by September 2011
    • 15k sqm
    • Macau's only modern Cineplex, a 9-screen, 3D-compatible, multifunction cinema theatre with a total
      capacity of 1,000 seats, as well as a 1,000 square metre multipurpose event plaza.
  • Cash: HK$ 4.4BN
  • Debt: HK$9.426BN
  • Closed 13x oversubscribed and upsized RMB1.38BN bond offering
    • 3-yr fixed unsecured notes at 4.625%
    • Cost of debt currently below 5% from 8%.
  • "Subsequent to year end 2010, all of the HK$1.3 billion/US$165 million convertible notes were converted into 173 million common shares, further strengthening the balance sheet and increasing the free-float of shares"

CONF CALL/Q&A

  • Starworld - what is the reason for the margin expansion?
    • Even though they held lower, the mix of RevShare and R/C VIP business helped them
  • Is the Q4 margin for construction materials sustainable?
    • They are shifting towards higher margin products for this business.  Also given the change in the way that they are reporting their results, you can't just look at topline and margins.  More business is in JVs.
  • HK$80-100MM/Q is a good run rate for corporate expense
  • Expect pre-opening expenses to increase significantly in 1H2011
  • Anticipate that they will be just about fully occupied in the hotel from the day that they open
  • Believe that the entertainment offering will be successful because it will be Macau's only cineplex. Adds value to being a fully integrating resort and also has a event plaza.
  • As the share price appreciates, there is a non-cash charge as a result of the convert
  • They have HK$5.5BN to spend plus the HK$600MM to spend on the entertainment offering - majority of which would be spent in 2011
  • Total staff they need to hire for Galaxy Macau?
    • 7600 upon opening
  • Starworld: Mix is 50.50 between Mass and VIP
  • Galaxy Macau table mix: 2/3 Mass 1/3 VIP