Blame it on lower group VIP GGR.
Galaxy Entertainment Group's 3Q14 group EBITDA of HKD3.3b, up 1% YoY and down 5% QoQ, brought 9M14 group EBITDA to HKD10.6b, up 17% YoY, which was within expectations at 74% of Maybank Kim Eng's full-year forecast.
According to a research note from Maybank Kim Eng, 9M14 group revenue of HKD55.7b was also within expectations at 75% of its full-year forecast.
The research note said although 3Q14 group revenue was up 6% YoY, group EBITDA rose only 1% YoY largely due to the new staff benefits.
Further, 3Q14 group revenue and EBITDA both eased 5% QoQ due to lower group VIP GGR and the aforementioned new staff benefits offset by higher group mass market and slot machine GGR.
Here's more from Maybank Kim Eng:
On its future expansion plans, Galaxy Macau (GM) 2 is on budget at ~HKD20b and on target to open by mid-2015, while site investigations for the HKD50b-60b GM3&4 will commence shortly.
The conceptual design for Hengqin Island is still being developed. The slight disappointment is the unveiling and re-launch of Grand Waldo has been delayed from 4Q14 to 1Q15.
We leave our forecasts unchanged. The meek results were expected and we believe GM2, and possibly GM3&4 and Grand Waldo, will drive earnings growth going forward.
We have not ascribed any estimate or value to the latter three, implying upside potential. Galaxy is our Top Pick in the Macau space. Maintain BUY and HKD63.30 TP.
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