aming revenue in the former Portuguese colony has surprised analysts and investors, hitting record levels since the start of the year. Macau is on track to outperform neon-lit rival Las Vegas this year by as much as fivefold in terms of revenue.
Galaxy, one of six licensed operators in Macau, said adjusted first-half earnings before interest, taxation, depreciation and amortization (EBITDA) jumped to us$ 230.9 million from us$ 127 million in the year-ago period. Analysts had expected an EBITDA number around us$ 192.4 million. That overshadowed an unexpected 20.4 % drop in first-half net profit to us$ 48.5 million.
Galaxy, around 20 % owned by private equity group Permira, said adjusted for the one-off us$ 102.6 million expenses related to the opening of its new us$ 2 billion property in the world's largest gaming destination , net profit was us$ 166.7 million. "I am comfortable saying that the one-offs are legitimate. The stock is going to react favourably to this. The market is going to like this," said Philip Tulk, Royal Bank of Scotland's gaming analyst in Hong Kong.
Galaxy shares jumped as much as 5.8 % to us$ 2.59 after the results announcement, before easing to around us$ 2,47 in mid-afternoon trade.
They are up about 120 % on the year despite a 20 % plunge in the gaming sector in mid-August on global market volatility. Shares have since recovered sharply on strong half-year earnings momentum in the sector and expectations of strong growth in the coming year.
Analysts forecast Macau's gaming revenue for August, due to be announced on Thursday, at about us$ 3 billion, citing unabated demand from cash-rich mainland visitors who continue to flock to the only place in China where casino gambling is legal.
Macau's July gaming revenue rose 48.4 % year on year to us$ 3.01 billion, the second highest gain this year. Galaxy Entertainment CEO Francis Lui told reporters at a briefing that he expected Macau's gaming revenue to grow more than 30 percent year on year in 2011.
Owned by Hong Kong property and construction tycoon Lui Che Woo, Galaxy had increased its market share to 19 % in July from 9 % in April, said Karen Tang, Deutsche Bank's gaming analyst in Hong Kong.
Valued at around us$ 9 billion, Tang wrote in a note that the company now ranked behind SJM Holdings Ltd , the gaming conglomerate owned by Macau icon Stanley Ho, in market share, jumping ahead of U.S. billionaire Sheldon Adelson's Sands China and Steve Wynn's Wynn Macau, since opening its new casino in May.
Galaxy's us$ 2 billion gold embossed property marks the latest addition to Macau's developing Cotai strip, already home to Melco Crown Entertainment's City of Dreams and Adelson's Venetian. "In my estimates I had assumed pre-operating expenses of us$ 12.8 million to us$ 16 million. They had to rush pretty hard to get the casino open but it has obviously had a major impact on their bottom line," Tulk of RBS said.
Concern that global economic woes will affect Macau are warranted, say analysts, but most agree that the gaming industry is unlikely to be severely impacted given China's relatively robust economy and the sustained ability of wealthy Chinese gamblers, who account for most of Macau's visitors, to obtain credit.
In a report released on Tuesday, Moody's said Macau junkets, middle men who loan credit to high-rolling VIP gamers to help them bypass currency restrictions, were not heavily reliant on the domestic banking system.
"Although there are concerns that tighter credit restrictions by the central government will slow the country's economic growth and eventually affect gaming spending, we expect the impact to be modest," the ratings firm wrote.