Galaxy’s earnings top estimates on mass-market bettors

HONG KONG — Galaxy Entertainment, the Macau casino operator that made Lui Che Woo a billionaire, reported second-quarter earnings that beat analyst estimates as mass-market gamblers offset a slowdown in high rollers’ wagers.

Adjusted earnings before interest, taxes, depreciation and amortization for the three months ended June rose 15 percent to HK$3.5 billion ($452 million) a year ago. That compared with the HK$3.4 billion average of 16 analyst estimates compiled by Bloomberg.

Sales climbed 25 percent to HK$38.4 billion in the first six months of the year, the company said in a filing to Hong Kong stock exchange. Net profit attributable to shareholders rose 29 percent to HK$6 billion in the first half.

Galaxy joins SJM Holdings Ltd. as the only Macau casino operators to exceed analyst expectations for quarterly earnings as the high-stakes gamblers who account for 60 percent of the city’s revenue spend less. Sands China Ltd., Melco Crown Entertainment Ltd. and Wynn Macau Ltd. have all reported earnings that fell short of analyst estimates in recent weeks.

Galaxy rose as much as 2.5 percent to HK$61.35, the biggest intraday gain since July 28. It traded at HK$60.70 as of 1:28 p.m. in Hong Kong trading. The stock has fallen 13 percent this year, lagging the benchmark Hang Seng Index’s 7 percent gain.

Galaxy, Melco Crown and Sands China are shifting resources to lure more vacationing Chinese and other “mass-market” gamblers to offset the drop in revenue by high rollers or VIP gamblers. They’ve added malls, theaters and restaurants to their resorts in Macau’s Cotai area, Asia’s answer to the Las Vegas Strip.

“The group remains very optimistic about Macau’s prospects,” the company said in the statement Tuesday. “The evolution of the market to mass gaming is likely to continue, supported by longer term drivers, such as improved transportation infrastructure and a rapidly growing Chinese middle class looking to broaden its horizons through increased travel.”

Arrivals from the mainland rose 15 percent year on year in the first half of 2014.

Macau’s gaming industry has been hit by President Xi Jinping’s nationwide crackdown on corruption, as well as a slowdown in the Chinese economy, which analysts forecast to grow at its slowest pace since 1990. Casino revenue in Macau, the only place where gambling is legal in China, fell 3.6 percent to 28 billion patacas ($3.5 billion) last month after the first decline in five years in June.

The company has approval to build as much as 2 million square meters (21.5 million square feet) of gross floor area on the Cotai Strip, the most among the city’s six licensed casino operators. It plans to quadruple the size of its Galaxy Macau resort by 2018.

Galaxy is spending HK$20 billion on the resort’s second phase in Cotai, which is on track to complete by mid-2015, it said Tuesday. The project is slated to add as many as 500 gambling tables and 1,300 hotel rooms. Construction on the planned third and fourth phases of Galaxy Macau will begin later this year, with an investment of at least HK$50 billion.

Galaxy would also consider investing at least HK$20 billion in Japan or Taiwan each if those markets open up, Deputy Chairman Francis Lui said in an interview in November.

Founder and Chairman Lui and his family own about 51 percent of Galaxy. He has an estimated net worth of $18.5 billion, according to the Bloomberg Billionaires Index.