The Zhitong Finance App learned that First Shanghai released a research report stating that it maintains Galaxy Entertainment's (00027) “buy” rating. The results for the fourth quarter of '23 are in line with expectations, with a target price of HK$56.08. The launch of the third phase of “Galaxy Macau” will help increase the Group's market share. Since the Group has good products and services, the most stable balance and liability situation in the industry, strong management's execution ability, and the launch of Galaxy and the Cotai Phase IV project, Hengqin project and potential overseas projects in the future, the bank is confident in the Group's long-term development.

First, Shanghai's main views are as follows:

Fourth Quarter '23 Performance Overview: Fourth Quarter '23 Performance Overview:

Galaxy's net revenue increased 254% year over year, up 7% month-on-month to HK$10.3 billion (recovering to 80% in the same period in 2019). VIP table transcoding increased by 408% year on year, up 6% month on month (back to 21% in the same period in 2019); midfield gaming revenue increased 398% year over year, up 5.2% month on month (up 13% from the same period in 2019). The Group's adjusted EBITDA increased 1.4% month-on-month to HK$2.8 billion (recovering to 69% in the same period in 2019), and the EBITDA rate was 27%. After deducting the impact of the lower win rate, EBITDA will increase by an additional 100 million yuan. Overall results are in line with expectations. The Group maintains a very stable balance and net cash holdings of HK$23.5 billion (the strongest in the industry). Furthermore, since the Group is confident about future developments, it was announced that it would pay another special dividend of $0.30 per share. The annual dividend payout ratio reached 32%, which was higher than expected.

“Galaxy Macau” and StarWorld Hotel Performance Overview:

The net revenue of “Galaxy Macau” and StarWorld Hotels increased 7% and 2% month-on-month respectively to HK$8.2 billion and HK$1.3 billion during the period (recovering to 88% and 47% in the same period in 2019, respectively); adjusted EBITDA was HK$2.57 billion and HK$350 million, respectively (to 80% and 45% of the same period in 2019, respectively). EBITDA rates were 31.4 and 28.1%, respectively. Hotel occupancy rates for Galaxy Macau and StarWorld Hotel are 95% and 100%, respectively. At the end of last year, the Group added catering facilities and moved the central high-end midfield gaming area at the “Galaxy Macau”; it is also replanning the distribution of gaming areas, hoping to improve the flow of people and customer experience. StarWorld Hotels also has plans to update facilities.

Updates to the 3rd and 4th installments of “Galaxy Macau”:

The third phase of “Galaxy Macau” will launch a high-end hotel (with about 100 guest rooms) in 2025, for very high-end midfield customers and self-operated VIP customers. The Group is also continuing to advance the fourth phase of the “Galaxy Macau” construction project, which is expected to be completed in 2027. The project has a development area of about 600,000 square meters. It will introduce a number of high-end hotel brands that are entering Macau for the first time, with a 4,000-seat theatre, diverse dining, retail, non-gaming facilities, gardens, and water amusement park areas. The capital expenditure for 2024 is estimated to be around 6.1 billion yuan (of which 5.1 billion yuan will be used for the third and fourth phases of “Galaxy Macau”, and the rest will be used to upgrade other facilities.

Other key points:

The Group's market share should drop slightly below 18% in the fourth quarter, but since the Group uses good products and launches new projects in the future, I believe the market share will pick up in the future. According to information, during the Spring Festival, the Group's hotel occupancy rate reached 100%; midfield business performance increased 20% over the same period in 2019. In order to expand overseas visitors, the Group has set up offices in Tokyo and Seoul to develop overseas business, and is preparing to set up an office in Bangkok.