Galaxy Entertainment Group believes its soon-to-open Cotai resort will draw more leisure-focused visitors to Macau
On 15th May, Galaxy Entertainment Group (GEG) will open its new flagship property, Galaxy Macau, billed as a ‘world class’ resort with an ‘Asian heart’. Galaxy Macau is likely to be the only major casino to open in Macau this year—although Sands China is scheduled to open properties on Cotai plots 5 and 6 by the end of 2011, most analysts believe construction delays will push back the openings to mid-2012.
The HK$ 14.9 billion (US$1.91 billion) Galaxy Macau sits on the eastern side of Cotai. It includes three hotels—Banyan Tree, Okura and Galaxy Hotel, which will all commence operations on 15th May and offer 2,250 rooms in total.
GEG said Galaxy Macau will open with 1,100 slots and 450 table games, with one third of tables designated for VIP play. The property’s 39,000 square meter gaming facility has capacity to house up to 600 gaming tables and 1,500 slots if the market demands further gaming capacity.
GEG currently operates around 500 tables at its existing casinos in Macau, so Galaxy Macau is set to almost double that figure.
Last year, the Macau government set a cap on the numbers of gaming tables in Macau at 5,500 until 2013. With 4,791 tables operating in the market at the end of 2010, there is room for just over 700 more tables even though the new GEG and Sands China properties have capacity to host nearly double that number.
GEG Vice-Chairman Francis Lui expressed confidence the government would allow Galaxy Macau to add more gaming tables if the demand arises, saying he believed the table cap was imposed in order to prevent gaming capacity from getting too far ahead of player demand, as opposed to limiting the industry’s growth.
Other draws
At opening, Galaxy Macau will also feature 50 dining outlets and a Banyan Tree spa, as well as ‘the world’s largest sky wave pool’, spanning 4,000 square meters with waves over 1.5 meters in height, and a man-made beach made with 350 tons of white sand.
Dr Lui Che Woo, Founder and Chairman of GEG, said Galaxy Macau will advance Macau’s transformation into an entertainment and leisure centre by giving the city its first resort tailor-made for the Chinese and Hong Kong travelers.
Francis Lui revealed there are plans for the property to host concerts, film premieres and other events to enrich Macau’s tourism appeal. Additionally, Galaxy Macau will boast Macau’s first 3D cinema with 9 screens, set to open in late 2011.
Galaxy Macau will open shortly after the holiday period following Labour Day on 1st May, and thus will not benefit from the traditional influx of Chinese visitors to Macau during the so-called ‘Golden Week’ period. Francis Lui explained the opening date was set to give Galaxy Macau staff more time to fine-tune their customer service skills. “We could have rushed it [in order to be open by Golden Week], but we decided that it is more important to give our customers the best experience possible.”
According to Mr Lui, the first phase of Galaxy Macau only occupies one third of the land parcel GEG has the right to develop on Cotai. He added the company has already begun working on the second phase of the property, with further details to be announced in due course. Mr Lui dismissed market rumours that some of the land parcel will be sold to a third party. “We are going to develop every inch of the land,” Mr Lui affirmed.
Undervalued?
Immediately after the announcement of the opening date, Union Gaming Research issued an upbeat comment on GEG stock (SEHK:00027), saying Galaxy Macau could easily “outperform very low expectations.” Union Gaming forecasts GEG’s 2011 net revenue and EBITDA to reach HK$30.7bn and HK$3.4bn, respectively, in 2011, and HK$44.5bn and HK$5.4bn, respectively, in 2012, adding its 2012 EBITDA estimate is 7% higher than current consensus expectations. GEG shares are currently trading at 16.2x Union Gaming’s 2011 EBITDA estimate and 9.3x the 2012 estimate.
GEG is the third Macau casino operator to open a property in Cotai. Wynn Macau is also in the process of designing a new 52-acre property in Cotai slated to open in late 2014 or early 2015.
