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Big beat probably in the stock

Galaxy should again exceed Street numbers for Q4.  However, given the big run in the stock recently, it probably won’t be much of a surprise.  Our Q4 estimate of HK$14.2BN in revenue and $2.2BN of Adjusted EBITDA is 4% and 21% higher than consensus, respectively. 

Galaxy is up 36% YTD so expectations have risen.  That combined with worries about slowing growth in Macau, share losses in February, and the opening of Sands Cotai Central, we wouldn’t necessarily be running out to buy the stock at current levels.

 

Q4 DETAIL:

Like last quarter, Galaxy’s casino operations should benefit from high hold.  Using theoretical hold of 2.85%, we estimate that luck benefited gross revenue by HK$1.3BN and EBITDA by HK$392MM.

Galaxy Macau

We are estimating Q4 revenue of HK$7.6BN and Adjusted EBITDA of HK$1,330MM.  Our revenue and EBITDA estimate are 30% and 39% ahead of consensus, respectively. 

  • Gross gaming revenue of $7.4BN
    • HK$5.7BN of gross VIP win
      • RC Volume of HK$168.3BN
      • Hold: 3.4%
      • Assuming theoretical hold of 2.85%, gross VIP win would be HK$925MM lower and EBITDA would be HK$330MM lower or HK$1BN – still 4.5% above consensus
    • Mass win of HK$1,375MM
    • Slot win of HK$275MM
  • Net non-gaming revenue of $246MM
  • Rebate & commission rate of 1.35% of turnover or 39.7% of win or HK$2.27BN
    • We assume 60% of the VIP business is revenue share based and 40% is RC based
  • Gaming premium of HK$32MM
  • HK$111MM of non-gaming related direct expenses
  • Fixed costs of HK$1BN

Starworld


We estimate that Starworld will report revenue of HK$6,050MM and Adjusted EBITDA of HK$796MM, 4% and 15% ahead of the Street, respectively. 

  • Gross gaming revenue of $5.9BN
    • HK$5.4BN of gross VIP win
      • RC Volume of HK$174.5BN
      • Hold: 3.1% compared to a hold of 2.9% (excluding this last quarter) since opening
      • Assuming theoretical hold of 2.85%, gross VIP win would be HK$400MM lower and EBITDA would be HK$62MM lower or HK$734MM – still 6.5% above consensus
    • Mass win of HK$499MM
    • Slot win of HK$60MM
  • Net non-gaming revenue of $117MM
  • Rebate & commission rate of 1.4% of turnover or 45.5% of win or HK$2.45BN
  • Gaming premium of HK$16MM
  • HK$29MM of non-gaming related direct expenses
  • Fixed costs of HK$450MM

Other stuff

  • City Club contribution of HK$68MM
  • Construction materials revenue of HK$473MM and EBITDA of HK$128MM
  • Net corporate costs of HK$132MM
  • D&A: HK$275MM