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Galaxy is scheduled to report their 3Q results in the wee morning hours (at least for those of us in the states) tomorrow, and we’re expecting a pretty strong quarter with bullish commentary about their prospects.  Of course they will be positive since they are holding well in the first half of what should be the biggest month ever in Macau.  However, going forward, market share will moderate with hold and Galaxy Macau is vulnerable to the opening of Sands Cotai Central.

3Q Detail:


We project Galaxy Group will report HK$13.44BN of revenue and HK$2.08BN of EBITDA (US$268MM).

  • We estimate that Starworld will report HK$6.44BN of revenue and Adjusted EBITDA of HK$902MM
    • VIP gross win of HK$5.83BN
      • VIP turnover of HK$179.4BN, up 31% YoY and a 3.25% win percentage
      • 45.5% rebate rate (in-line with last quarter) or 1.48% - this likely includes rebates for Mass play as well
    • Mass win of HK$434MM and slot win of HK$64MM
    • HK$114MM of net non-gaming revenue
    • Variable expenses of HK$5,164MM
      • Rebates and commissions: HK$2.65BN
      • Gaming taxes & premium: HK$2.48BN
    • HK$375MM of assumed fixed expenses
    • Net comparable US GAAP revenue would be HK$3.8BN (netting out of rebates) and would result in a comparable GAAP margin of 23.8% vs. a reported margin of 14%
  • We estimate that Galaxy Macau will report HK$6.54BN of revenue and Adjusted EBITDA of HK$1,188MM (US$152MM)
    • VIP gross win of HK$5.035BN
      • VIP turnover of HK$168.4BN, assuming 4% direct play and a 3% win percentage
      • 33.5% rebate rate (in-line with last quarter) or 1%
    • Mass win of HK$1,045MM and slot win of HK$240MM
    • HK$222MM of net non-gaming revenue
    • Variable expenses of HK$4,754MM
      • Rebates: HK$1.69BN
      • Commissions: HK$470.5MM (25bps/ 10% of win)
      • Gaming taxes & premium: HK$2.46BN
    • HK$600MM of assumed fixed expenses
    • Net comparable US GAAP margin of 24.5% vs. a reported margin of 18.2%
  • We estimate that City Clubs will report HK$150MM of revenue and Adjusted EBITDA of HK$37.5MM
    • Most of City Clubs had miserable hold this quarter – which came in at just 1.9% in 3Q (September was actually negative for 2 properties) vs. low hold of 2.3% last quarter.
    • RC volumes at City Clubs declined 11% YoY – in-line with the YoY decline experienced in 2Q11
  • We estimate that Construction Materials will report HK$310MM of revenue and Adjusted EBITDA of HK$76MM
  • Other:
    • Net corporate expenses of HK$125MM
    • D&A:  HK$269MM
    • Finance costs:  HK$155MM
    • JV share of PNL:  HK$40MM