Summary of results for the first quarter of '22: Galaxy's net revenue decreased 19.7% year-on-year and 4.3% month-on-month to HK$4.10 billion. The number of VIP gambling table transfers fell 67.6% year over year, a decrease of 30.5% over the previous month; midfield gaming revenue decreased 6.9%/12.4% year over year and month over month, respectively. Average daily operating expenses were well controlled and remained at $2.3 million. The Group's adjusted EBITDA fell 44.9% month-on-month to HK$580 million, and the EBITDA rate was 14.0%; the performance was better than expected. The Group's balance and liability position remains very stable, with net cash holdings of HK$24.5 billion (the strongest in the industry and also earns interest income: $240,000 per day). Labor Day holiday: The number of visitors to Australia rebounded month-on-month, mainly from Guangdong Province. Group hotels have an occupancy rate of 80% (if calculated on the number of rooms available)/70% (if calculated on the total number of rooms).
“Galaxy Macau” and Star Hotel performance overview: During the period, the net revenue of “Galaxy Macau” and Star Hotel decreased by 4% and 37% month-on-month to HK$3.01 billion and HK$4.2 billion, respectively; adjusted EBITDA decreased by 5% to 7.2 per cent and turned into a loss of -58 million HK$58 million, respectively. The EBITDA rates were 23.5% and -13.7%, respectively. The hotel occupancy rates for Galaxy Macau and StarWorld Hotel were 37% and 51% respectively.
The Star Hotel VIP lounge has ceased operation, and the project will focus on midfield business; while “Galaxy Macau”'s VIP business comes from its own high-end business.
The construction project for the third phase of “Galaxy Macau” has basically been completed: the construction project for the third phase of “Galaxy Macau” has basically been completed. The exact opening time will depend on market conditions. At that time, the “Raffles” Hotel (which offers 450 luxury suites) will be launched first, followed by the “Andaz” Hotel and Exhibition Center. The development of the fourth phase of “Galaxy Macau” has also begun. The total budget for the third and fourth phases is HK$50 billion, of which approximately HK$21 billion has been invested. In addition, Future Group's new projects also include: new projects in Hengqin and overseas; the reserves are the highest in the industry, and there is huge potential for long-term growth.
Maintaining the buying rating, target price of HK$55.57: The Group's performance in the first quarter of '22 was better than expected. Since the Group has good products and services, the balance and liability situation is the most stable in the industry, the management's execution ability is strong, and Galaxy will launch the Cotai Phase III and IV projects, the Hengqin project and potential overseas projects in the future; we are confident in the long-term development of the Group. We maintain our buy rating. The target price is HK$55.57, equivalent to 17 times EV/EBITDA in 2024.
Risk factors: We believe the following are some of the more important risks: 1) economic growth is worse than expected, 2) policy risks, 3) competition from other operators, 4) the impact of the novel coronavirus pneumonia epidemic is greater than expected, and 5) the recovery of the industry is slower than expected.