Financial group Jefferies says it expects Galaxy Entertainment Group (GEG) to remain the only Macau concessionaire to pay a dividend to shareholders in 2024, and to be in a position to potentially raise its payout ratio.
The dividend forecast formed part of a research note issued Thursday after Jefferies analyst Andrew Lee spent time with management during a trip to ICE London last week. While GEG has yet to publish its FY23 and 4Q23 financial results, Lee said the company viewed 2023 as a “transitional year” given the hiring and opening of Galaxy Macau Phase 3, which led to a slight loss in market share, but that management expects to see the full impact of Phase 3 in 2024 which should in turn see it regain share.
On dividends, Lee wrote, “Galaxy was the only operator to pay a dividend during 1H23 and we expect the same for 2H23 and 2024 results. Historically, the company’s dividend payout policy is ~30% but we think the payout ratio could be gradually increased given its strong financial position.”
GEG was also the only Macau operator to survive the COVID-19 pandemic without the need for substantial borrowings thanks to its conservative fiscal policy and focus on building cash reserves, and had around HK$23 billion (US$2.94 billion) in cash on hand at the end of 3Q23 – even after the opening of Phase 3.
“We expect the payout ratio to be unchanged during 2H23 results but could be raised during 1H24 results,” Lee said.
The analyst also revealed GEG has plans for a Phase 5 development once Galaxy Macau Phase 4 is complete, although this will primarily focus on the redevelopment of Broadway Macau to add more room capacity.
“Other potential future developments include the land in Cotai between Galaxy and The Venetian bus station, and Hengqin island,” Lee said. “Management reiterated their interest in a Thai integrated resort but timing is unknown.”
