Galaxy Macau Opens On New Frontier

Posted: May 16, 2011 in Uncategorized

QUICK UPDATE OF MACAU CASINO LANDSCAPE

16th May 2011  Mon

After long delay, Francis Lui’s big dream – Galaxy Macau finally opens on 15th May 2011 on the Cotai Strip next to Venetian Sands and City of Dreams.

With another mega resort joins the crowded market scene, what can be expected of Macau’s new frontier?

Here’s our assessment:

(1)  The Galaxy Macau will further dilute the existing mass gaming market, making life more difficult for City of Dreams and Venetian Sands. This is provided that Galaxy Macau could really perform with par excellence on the turf of Mass Market. There’s possibility that Galaxy Macau fails to do so and, making their EBITDA margin rather weak in the next 12 months. From Galaxy’s records, they are very weak in the mass gaming market.

(2)  VIP market will be given a boost for sure, with new luxury gaming facilities thrown into the arena. Galaxy is expected to do fairly well in this segment based on their profit-sharing junket rooms operating model, in which they managed to capture significant market share in Macau.

(3)  It is envisaged that Galaxy Macau’s business model will be 75% VIP gaming revenue model vis-a-vis low 25% mass gaming. Other hospitality operations (such as hotel, F&B, entertainment etc.) will be about 15% of total gross revenue split at best.

(4)  Galaxy Group has little if not very weak management experience in running mega resort casino property. The main operational issues will likely be systems and service level. In  particular, mass gaming floor efficiency would be low and hence, effecting win percentage.

(5)  Overall, Galaxy Macau may just be able to stimulate a luke warm integrated resort landscape in Macau, dominated by VIP casino phenomenon. If it succeeds in doing so, there will be a real change and contribution in the territory’s hope for balanced economy and turning around to be a true “Asia’s Las Vegas”. Let’s watch closely.

Pushing the new frontier...

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Comments
  1. Jacobs says:

    I would be surprised if this team in Galaxy mgt. can survive more than 6 months… after opening. Good luck to them. Permira hedge/equity fund investors will ask for redemption from their investment in Galaxy. As the author says, it’s a completely different “frontier” Galaxy people have ever ventured into.

    Jacobs

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