Galaxy Entertainment Group Returns to Pre-Pandemic Profit Levels with US$244M EBITDA; Macau Casinos Comeback as Mass-Market Players Return

Casinos in Macau enjoyed a resurgence in the first quarter of 2023, with Galaxy Entertainment being the most recent to claim a significant increase in profits on Monday. This followed the formal relaxation of Covid-19 limitations.

Casino money is once again unstoppable.

After slipping behind Las Vegas in terms of gross gaming income because to tight government restrictions, Macau has once again become the undisputed casino capital of the world.

Galaxy Entertainment, which is traded on the Hong Kong Stock Exchange, reported that its "net revenue had recovered to more than half its pre-pandemic figures." The firm has a stake in Wynn Resorts, a competitor, and is thus more suited to the present climate, where the emphasis is on the mass market. This is in addition to our Galaxy and StarWorld casinos in Macau.

As JPMorgan's DS Kim put it on Monday, "[the results affirm Galaxy as] our top pick in the Macau gaming sector alongside Sands China," referring to the Macau operation of the late Sheldon Adelson's Las Vegas Sands, which similarly catered to casual players rather than high rollers.

Surprising comeback:

Following a crackdown on gambling that saw the arrest of prominent promoters who supplied VIP players who had pooled their money, the strength of this resurgence surprised observers. But even the high-end market is showing indications of improvement.

According to IGamiX's casino analyst Ben Lee: "We all expected the VIP segment would be quite depressed [compared to what it had been in the past], but the stronger than expected rebound... has surprised us all." In addition, Galaxy's earnings were better than the expected HK$1.7bn (before interest, taxes, depreciation, and amortisation). When compared to the same quarter in 2019 before the pandemic, net earnings dropped from HK$13bn to HK$7bn.

According to Kim, this means that Galaxy has recovered 48% from its pre-Covid-19 ebitda levels, which was HK$1.91bn ($240mn). This is consistent with the 46% first-quarter growth seen by its competitors. Solid mass performance was the bright spot.

The following are some other Macau casinos that have enjoyed an upturn:

Macau's Sands China, which owns five major resorts, reported a first-quarter net profit of $1.27 billion, down from $2.33 billion in the same period of 2018 (before the pandemic). Since 2021, when it sold its Las Vegas operation, the business has relied virtually exclusively on revenue from its casinos in Macau and Singapore. Even though management claimed the situation had improved, severe manpower shortages delayed the recovery by making just two-thirds of the hotel rooms at the Sands available in the first three months.
As of the beginning of May, MGM China reported a net income of HK$4.8bn for the first quarter, which is roughly 84% of its profit for the same time in 2019; experts say that "SJM is a laggard among the six operators and reported net revenue of HK$3.7bn compared with HK$8.47bn in the same quarter in 2019." According to JPMorgan's Kim, "It is the only Macau results this quarter that are not a significant beat. Nonetheless, it is comforting to know that even SJM... has witnessed steadily rising demand month after month.
The authorities of the Chinese city implemented a set of measures that drove out foreign workers, many of whom were employed in the hotel industry. Furthermore, as part of Covid prevention measures, at one point officials banned foreign workers from reentering Macau's borders after departing.