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GALAXY ENTERTAINMENT FIRST QUARTER RESULTS CALL NOTES

 

HIGHLIGHTS FROM THE RELEASE

  • "The first quarter of the year is historically strong due to the seasonal impact of Chinese New Year. Surprisingly the second quarter has posted a record performance for April and the outlook for the full year remains promising."
  • GEG EBITDA increased 79% y-o-y to HK$417MM on revenue growth of 51% to HK$3.95BN
  • Starworld EBITDA increased 81% y-o-y to HK$369MM on record VIP turnover of HK$102BN (up 86% y-o-y)
    • EBITDA margin for the quarter was 11% compared to 10% in Q109 or approximately 18% compared to 16% in Q109 under the US GAAP calculation
  • City Clubs casinos contributed HK$30MM in 1Q2010
  • Construction materials earned HK$285MM of revenues and HK$68MM of EBITDA up 51% y-o-y.  The improvement in results reflects a strategic shift to a number of new Joint Ventures in Mainland China.
  • Galaxy Macau still on schedule and on budget to open early 2011.

CONF CALL NOTES

  • Sentiment in Asia is very positive and that positive sentiment is driving spending growth
  • Had 2.9% hold compared to 3.1% in 4Q09
  • Shifted the business mix of construction business to higher margin products. Don't report revenue from minority partnerships but do report EBITDA. Hence the decline in revenue but increase in EBITDA
  • Invested a little over HK$5BN through 1Q2010 on Galaxy Macau

Q&A

  • Early 2011 means 1Q2011 for the Galaxy Macau opening
  • $50-60MM corporate expense guidance going forward increasing somewhat going into the opening of Galaxy Macau
  • Increased their margins due to mix within VIP and more efficient scheduled, despite lower hold this Q
  • Had 242 tables, opened 2 more rooms this quarter and shifted more tables to VIP 130 from 110 and had 95 Mass tables from 110 last quarter.  Balance is premium direct business play. VIP only increased a little because the shift occurred mid quarter. Expect more visible benefit next quarter
  • Encore opening has actually helped the Peninsula and they haven't felt any negative impact from it
  • Feel confident that they profitable operate on Cotai given the growth in the market and the latent demand. Also infrastructure improvements coming over the next few months (increase in Guanbau gate capacity and airport, construction of high speed rail there as well)
  • Very conservative on extending working capital to their junkets.  They have increased it modestly but not relative to the volume growth
  • Anything special driving the surge in gaming revenues - especially in May?
    • Doesn't feel like there is a recession in Asia - economy is solid and improving and that's reflected in people's comfort in spending more
    • Increase in RMB flows buying the HKD