GALAXY BEAT LIKELY BUT IT'S NOT THE STORY

Q1 should be decent but performance past the opening of SCC will be key

Galaxy should eke out a small beat this quarter.  However, what investors really care about is Galaxy’s ability to hold its own against SCC.  We know that Galaxy’s market share remained high for the first two weeks after the opening of SCC.  If volumes hold up, the stock’s recent momentum should continue, barring a big VIP slowdown.

As we wrote about on April 24, 2012 in "SCC NOT IMPACTING LVS SHARE YET," SCC has not yet boosted LVS’s share. Meanwhile, Galaxy’s share is chugging along at 20-21%, in-line with their share in March.  To be fair, it’s still too early to tell what kind of impact SCC will ultimately have on Cotai.

 

Q4 DETAIL

We project that Galaxy will report HK $2,028BN of EBITDA and gross revenue of $13.2BN with Galaxy Macau holding a little high and Starworld a little low.

Galaxy Macau

We are estimating Q1 revenue of HK$7.143BN and Adjusted EBITDA of HK$1.204BN.  

• Gross gaming revenue of $6.9BN
  • HK$5.05BN of gross VIP win
    • RC Volume of HK$170.7BN
    • Hold:  2.96%
    • During the first 3 quarters of operations, Galaxy Macau’s average hold rate was 3.2%.  Therefore, we consider this quarter's hold rate normal.  
• Mass win of HK$1,530MM
• Slot win of HK$296MM
• Net non-gaming revenue of $265MM
• Rebate & commission rate of 1.28% or 43.3% or HK$2.19BN
  • We assume 60% of VIP business is revenue share-based and 40% is RC-based
• Gaming premium of HK$32MM
• HK$119MM of non-gaming related direct expenses
• Fixed costs of HK$918MM

Starworld

We estimate that Starworld will report revenue of HK$5,580MM and Adjusted EBITDA of HK$786MM 

• Gross gaming revenue of $5.46BN
  • HK$4.8BN of gross VIP win
    • RC Volume of HK$176.4BN
    • Hold:  2.74% compared to a hold of 2.91% (excluding this last quarter) since opening
    • Using Starworld’s historical hold rate, gross VIP win would be HK$325MM higher and EBITDA would have been HK$46MM higher
• Mass win of HK$562MM
• Slot win of HK$70MM
• Net non-gaming revenue of $117MM
• Rebate & commission rate of 1.25% or 45.5% or HK$2.2BN
• Gaming premium of HK$15.5MM
• HK$29MM of non-gaming related direct expenses
• Fixed costs of HK$420MM

Other stuff

• City Club contribution of HK$42MM
• Construction materials revenue of HK$423MM and EBITDA of HK$105MM
• Net corporate costs of HK$110MM