20160225-美银美林-银河娱乐-00027.HK-4Q15_beat_on_strong_Galaxy_Macau_and_Starworld_mass_special_div_declared_11页_541kb

Galaxy Entertainment 4Q15 Results and Investment Summary

核心内容

Galaxy Entertainment Group Ltd (GXYEF) reported strong 4Q15 results, with adjusted EBITDA reaching HK$2,476 million, surpassing both analyst estimates and consensus by 11% and 5% respectively. This performance was driven by the continued growth of Galaxy Macau and Starworld, while Broadway faced a decline due to poor luck. The company's EBITDA margin improved by 200 basis points year-over-year to 18.6%, indicating better operational efficiency.

主要观点

• Galaxy Macau showed significant growth with revenue and EBITDA increasing by 11% and 21% quarter-over-quarter, respectively, due to a 7% sequential improvement in mass and 10% in VIP rolling.
• Starworld's mass market revenue exceeded expectations with a 23% year-over-year improvement.
• A special dividend of HK$0.15/share was declared, bringing the full year dividend to HK$0.29/share, with a 30% payout ratio.
• The company has achieved HK$500 million in cost savings in 2015 and expects an additional HK$300 million in 2016. Phase 2 capex was reduced by HK$400-500 million.
• Site investigation work for Phase 3 and 4 is set to begin in 2016, but the majority of capex will not materialize for the next two years.
• Galaxy's balance sheet and free cash flow (FCF) remain robust, with net cash of HK$6.5 billion and a FCF yield of 4%, supporting its strong position in the market.

关键信息

• 4Q15 EBITDA: HK$2,476 million (adjusted), beating estimates by 11% and consensus by 5%.
• Galaxy Macau EBITDA: HK$7,751 million, up 21% QoQ.
• Starworld EBITDA: HK$2,024 million, up 7% in 2016E.
• Broadway EBITDA: HK$78 million, down 44% in 2016E.
• Construction EBITDA: HK$308 million, down 16% in 2016E.
• Corporate Expenses: HK$-805 million in 2016E, reflecting cost management.
• Net Income (Adjusted): HK$4,161 million in 2015E, HK$5,208 million in 2016E.
• EPS (2016E): HK$1.21, up 28% from 2015E.
• Free Cash Flow (2016E): HK$4,195 million, indicating strong liquidity.
• Price Objective: HK$35.20, based on 14-15x 2016E EV/EBITDA.
• Current Share Price: HK$25.50, implying a 38% upside potential.
• Valuation Metrics:
  • P/E (2016E): 21.0x
  • Dividend Yield (2016E): 1.3%
  • EV/EBITDA (2016E): 10.5x
  • Free Cash Flow Yield (2016E): 3.89%

估值分析

• Galaxy's valuation is considered attractive, with a 11.1x EV/EBITDA in 2016E, still 8% below its long-term average.
• The company's strong balance sheet and FCF make it well-positioned to withstand further downturns and benefit from market rebounds due to its substantial landbank in Cotai.
• The SOTP (Sum of the Parts) valuation for 2016E is HK$150,683 million, with a 14.6x implied PER and a 11.1x EV/EBITDA.

风险提示

• Downside risks include policy changes (e.g., travel restrictions, flu outbreaks), reliance on junk boats, intensifying competition in Macau and Asia, and potential revenue slowdowns due to tightened liquidity in China.

投资评级

• Investment Opinion: Buy
• Rationale: Galaxy's strong financials, operational performance, and growth potential make it an attractive investment opportunity.

分析师信息

• Billy Ng, CFA: Research Analyst, Merrill Lynch (Hong Kong)
• Angeline Ooi: Research Analyst, Merrill Lynch (Hong Kong)
• Ronald Leung, CFA: Research Analyst, Merrill Lynch (Hong Kong)

公司简介

• Galaxy Entertainment Group Ltd is a leading operator of casinos in Macau, previously known as KWah Construction. It acquired the casino concession in 2005 from the Lui Family.

行业分类

• Company Sector: Gaming

表格汇总

表1: Galaxy Entertainment Group's 4Q15 Results

表2: Galaxy's Investment Summary

总结

Galaxy Entertainment Group Ltd demonstrated strong performance in 4Q15, with adjusted EBITDA surpassing expectations. The company's robust financial position, including a strong balance sheet and FCF yield, supports its resilience in a downturn and growth potential in a rebound. Key drivers include the performance of Galaxy Macau and Starworld, with Galaxy Macau showing notable growth in both revenue and EBITDA. The special dividend and potential for further upgrades in earnings estimates reinforce its investment appeal. The 12-month price objective of HK$35.20 reflects a 14-15x EV/EBITDA multiple, which is in line with the Macau gaming sector's average. Despite this, the current valuation is seen as undervalued, with a 38% upside potential. The company's growth prospects and financial strength continue to make it a top pick in the gaming sector.