GALAXY Q4 2014 CONFERENCE CALL NOTES

Takeaway: Margins missed expectations in Q4 and fell to lowest level since Q1 2012. Ph2 table request application submitted yesterday.

CONF CALL

  • Special dividend of HK$0.28 on May 22
  • Q4: Playing lucky benefited EBITDA by HK$35m
  • Galaxy Ph2 opening: on time
  • Operating velocity remains unchanged
  • Galaxy Macau: Playing lucky benefited EBITDA by HK$40m
  • Opened 2 VIP rooms (1 in December 201`4 and 1 in February 2015)
  • Starworld: bad luck of $5m
  • Galaxy Macau Ph2: invested HK$10.8bn (HK$1.8bn in Q4 2014).
  • Q4 2014: $790m total borrowing capacity

Q & A

  • Galaxy Ph2:  
    • Not as much VIP offering as you would expect given there is not much junkets out there
    • Cost of running property shouldn't change much per laborer
    • Officially submitted table requests yesterday.  Govt will be pragmatic about the process. Will be sitting down with govt very soon. Will not talk about table # expectations on the call.
  • 5 small VIP operators ceased operations in 2014 at Galaxy
  • 1-2% margin impact on employee retention program
  • Direct VIP:  growing but still very small part of overall VIP business. That segment has done well.
  • Labor cost pressures:  increasing staff numbers, compensation costs up ~20%.  Will continue to offer competitive package to employee and will evaluate pay costs in mid-year.
  • Full smoking ban:  very serious issue. Working with govt. 
  • Mainland China not only targeting Macau on corruption issues
  • Cannibalization between Starworld and Galaxy Macau:  not an issue since one property in Peninsula, one on Cotai. 
  • Galaxy Ph3/4 opening: 2018 (unchanged from previous commentary)
  • Want have some flexibility regarding dividends