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NEWS 26 October 2016

Macau tourists help Galaxy’s Q3 profit jump

By Caroline Watson
Due to Galaxy Entertainment Group Ltd.’s tourist-friendly casino resorts drawing more recreational bettors and tourists to Macau, the operator posted a 28% jump in Q3 net profit, the highest since Q3 2014.

The casino operator reported a profit of HK$2.7bn for the quarter ending in September, with revenue rising 5% to HK$12.9bn.

As well as five other listed casino operators in Macau, Galaxy have been hit by a sagging demand from high roller Chinese gamblers due to a crackdown on corruption and slowing economic growth in the mainland.

After the China Government ordered the city to diversify from the industry amid an anti-corruption campaign, scaring away VIP players, Macau entered a two-year slump in gambling revenue.

Rivals such as Sands China and Wynn Macau have also launched projects designed to appeal more non-gamers in the world’s biggest gambling hub, in the hope of reversing the VIP customer segment, where visitor numbers have dwindle since the beginning of 2014.

In a security filing, Galaxy confirms: “We are encouraged by the continuing signs of market stabilisation, yet it remains too early to call the bottom of market. We would like some more time before calling it a definitive trend.”

Macau is the only location in China where citizens are legally allowed to gamble, but non-gaming has emerged as a bigger priority for the operators as gaming revenues have declined.

Whilst gambling revenue for Galaxy’s main VIP business slumped 4% in the third quarter, receipts for recreational gamblers jumped 17%. In a statement on Wednesday the company says: “The Macau market is clearly transitioning to a mass market focused environment and Galaxy continues to align its operations with the changing market conditions.”

Mainland Chinese tourists (the bulk of visitors to Macau) rose to almost one million during the week-long National Day holiday earlier this month. Nonetheless, Daiwa Capital Markets Hong Kong Ltd. Analysts explained how an ongoing price war could bring risks to margins, as Macau casino operators cut hotel rates and lowered minimum bets to draw players.

It seems the increase in the number of competing casinos, with more set to open next year, could put pressure in the coming months, despite the promising figures.
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