• HEDGEYE’S MARKET BRIEF
    Our FREE Investing Newsletter
    Get Exclusive Summer Sale Discounts

    By joining our email marketing list you agree to receive marketing emails from Hedgeye. You may unsubscribe at any time by clicking the unsubscribe link in one of the emails. All Hedgeye products and services are subject to Hedgeye’s Terms of Service available at www.hedgeye.com/terms_of_service

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