GALAXY ENT. Q3 2015 CONFERENCE CALL NOTES

CC NOTES

  • Group Rev of $12.3 billion, up 5% QoQ but down 29% YoY

  • Adj EBITDA of $2.1 billion, UP 13% QoQ but down 36% YoY

  • Galaxy Macau

    • Adjusted EBITDA of $1.7 billion, down 30% YoY, up 19% QoQ
    • Played unlucky in Q3 which reduced Adjusted EBITDA by approximately $117 million
    • Hotel occupancy across the five hotels was 99%, Non-gaming revenue of $742 million, up 92% YoY and 60% QoQ
    • VIP Win % = 3.6% in Q3 2015 vs 3.2% in Q3 2014
    • Mass Hold % = 43% in Q3 2015 vs 44.9% in Q3 2014
  • StarWorld
    • Adjusted EBITDA of HK$514 million, down 43% YoY, up 1% QoQ
    • Played unlucky in Q3 which reduced Adjusted EBITDA by approximately HK$11 million
    • Hotel occupancy was 99%
    • VIP Win % = 2.7% in Q3 2015 vs 2.9% in Q3 2014
    • Mass Hold % = 40.3% in Q3 2015 vs 41.4% in Q3 2014
  • Broadway
    • Virtually broke even with Adjusted EBITDA of HK$(1) million 
    • Played unlucky in Q3 which reduced Adjusted EBITDA by approximately HK$3 million 
    • Hotel occupancy was 99%
    • Mass Hold % = 25.1% in Q3 2015 vs 20.7% in Q2 2015
  • Development cost savings of HK$400-HK$500 for Phase 2

  • Issuing a special dividend of HK$0.14 per share 

  • Mass and non gaming - growing relative to VIP, despite still being the market leader in VIP

  • Will be realizing a HK$800 million cost savings program, and so far is on pace to deliver this initiative.

  • Cost savings program was previously underway, but are just now quantifying the program. 

  • Hotel OCC continues to grow. Up to 99% from 96% over the same period last year

  • Bad luck hurt virtually all properties, luck on mass side was slightly better than the prior year period

  • Starworld Mass business growing very nicely 

  • Phase 2 Update - Invested a total of $15.7 billion thus far on the project 

  • Finished their strategic investment in Monaco's SBM (casino monopoly in Monte Carlo)

  • They remain cautiously optimistic regarding the future of Macau

  • Cite that a growing consumer in China will aid the growth of Macau

  • Anticipate to re-capture lost players when growth resumes 

  • Flexible balance sheet is a huge positive going forward and will allow Galaxy additional opportunities 

q/a

  • Cost savings? Where will the costs be taking out?
    • HK$800 million in savings and they have done about 35% of that thus far. Should be a 12-18 month program. 
    • Labor, marketing, and procurement will take up the largest share of the savings
    • Shuffling around their human resources more effectively 
    • Looking into strategic marketing initiatives - wouldn't specify 
  • China/Macau Government comments
    • Confident in the government's ability to support the industry and economy. See their willingness to work with the operators.  Recent steps are a real positive
  • Constantly looking to re-allocate their tables to Mass and premium Mass
    • Revenue mix is really beginning to shift from VIP to mass, non gaming and slots. Represents roughly 50% of revenue now 
    • Cited strong Golden Week as a positive sign for the future.
    • Opening of Horizon their premium mass offering has been very successful and will look to continue to use that as a future driver
  • Table allocations. Awarded another 100 tables?
    • They are in further talks with the government, but haven't received confirmation for the additional tables 
  • Tables are reportedly under utilized, how will they help?
    • Would offer flexibility to allocate more tables to effective areas of the casino. 
    • It is also another sign of support from the government
    • Will apply the tables to their highest and best use, (likely to premium mass segment)
  • Couldn't comment on Phase 2's specific contribution to EBITDA but said it was very accretive
  • Non Gaming was so strong due to Phase 2 and they are very pleased with this segment. 
  • Non Gaming Margin = Very high (wouldn't give exact numbers)
  • SSS growth looking strong in their retail segment. 
  • 60k foot traffic per day for phase 2 was the whisper number, is that still holding?
    • Still north of 60k per day, but they are also attracting better customers and Horizon will continue to drive that number higher
  • Phase 3 or 4 changes to CAPEX?
    • Studying diligently, focusing on consumer and forecasting where the consumer will be. 
    • CAPEX allocation is subject to change but for now, they haven't made changes
  • Retail area not open until end of july, should we see more of an uptick since they weren't open for the full Q?
    • Yes, expect to open more stores which will add to the non gaming number. 
    • They are very bullish on the potential of their retail segment

SECTOR SPOTLIGHT | Live Q&A with Healthcare Analyst Tom Tobin Today at 2:30PM ET

Join us for this edition of Sector Spotlight with Healthcare analyst Tom Tobin and Healthcare Policy analyst Emily Evans.

read more


Cartoon of the Day: Bulls Leading the People

Investors rejoiced as centrist Emmanuel Macron edged out far-right Marine Le Pen in France's election day voting. European equities were up as much as 4.7% on the news.

read more

McCullough: ‘This Crazy Stat Drives Stock Market Bears Nuts’

If you’re short the stock market today, and your boss asks why is the Nasdaq at an all-time high, here’s the only honest answer: So far, Nasdaq company earnings are up 46% year-over-year.

read more

Who's Right? The Stock Market or the Bond Market?

"As I see it, bonds look like they have further to fall, while stocks look tenuous at these levels," writes Peter Atwater, founder of Financial Insyghts.

read more

Poll of the Day: If You Could Have Lunch with One Fed Chair...

What do you think? Cast your vote. Let us know.

read more

Are Millennials Actually Lazy, Narcissists? An Interview with Neil Howe (Part 2)

An interview with Neil Howe on why Boomers and Xers get it all wrong.

read more

6 Charts: The French Election, Nasdaq All-Time Highs & An Earnings Scorecard

We've been telling investors for some time that global growth is picking up, get long stocks.

read more

Another French Revolution?

"Don't be complacent," writes Hedgeye Managing Director Neil Howe. "Tectonic shifts are underway in France. Is there the prospect of the new Sixth Republic? C'est vraiment possible."

read more

Cartoon of the Day: The Trend is Your Friend

"All of the key trending macro data suggests the U.S. economy is accelerating," Hedgeye CEO Keith McCullough says.

read more

A Sneak Peek At Hedgeye's 2017 GDP Estimates

Here's an inside look at our GDP estimates versus Wall Street consensus.

read more

Cartoon of the Day: Green Thumb

So far, 64 of 498 companies in the S&P 500 have reported aggregate sales and earnings growth of 6.1% and 16.8% respectively.

read more