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Galaxy Entertainment Group Ltd (Macau casino stocks)


kab60
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Is anyone taking a look at these? While not exactly value stocks, most casinos on Macua have dropped almost 50 pct. this year.

 

The main driver is president Xi Jinping and his crackdown on corruption. Basically, Macau is the only place in China where Casinos are allowed (and only 6 operators have licenses, I believe). In a couple of years there'll be a highspeed train that will connect it to the mainland.

 

A company like Galaxy Entertainment Group Ltd has showed crazy growth (like most on Macau), even though it has slowed down this year due to a number of factors; Jinping, world championsship of soccer in the summer, a smoking ban, new visa and credit card rule, demonstrators (rightfully, I'm sure) demanding higher wages etc. Basically, pretty much everything has gone the wrong way for Macau casinos this year which is why I find the valuation interesting at the moment.

 

A company like Galaxy funds a couple of huge news hotels solely with the cashflow from the existing business on Macau, so they know how to generate money.

 

From my understanding, Chinese love to gamble, and corruption or not - I'm pretty sure it'll continue to stay that way. And I like the numbers even though competition will pick up with more hotels underway: 50 pct. revenue growh (3 year) and 122,4 pct. income growth (3 year) for Galaxy.

 

Xi Jinping is visiting Macua these days, and the stocks just took another big hit today. I was just wondering if anyone else was having a look at these stocks at the moment (or have some general input as to why casinos might/might not be intestering to invest in).

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  • 6 months later...

Just wanted to bump. It seems like the Chinese meltdown has hit HK and therefor Galaxy as well. I have no position but others might find it worth a look. Other interesting ideas hit by Chinese development?

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As a follow up to my previous comment, I have yet to buy any of these. It has been interesting watching the gaming revenue statistics come in each month; they're bleeding customers, and the declines, at least so far, are barely decelerating.

 

It'll be interesting to see what happens here. You have to assume the operating leverage on these companies will be significant, so the multiples probably aren't near as low as they look.

 

Still watching. Still interested.

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The operating leverage is significant.  40% of expenses is taxes paid to Macao's government.  Were the casino's overearning because of VIPs moving their money out of the country?  Yes.  Can gross gaming revenue come back?  With time, hopefully I hope.

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