February 28, 2017 / 8:59 AM / in 8 months

Macau's Galaxy posts forecast-beating 2016 profit, upbeat on outlook

HONG KONG (Reuters) - Macau casino operator Galaxy Entertainment Group (0027.HK) posted a better-than-expected 51 percent rise 2016 net profit, thanks to a recovery in the world’s biggest gambling hub, and forecast double-digit gaming revenue growth for this year.

A logo of Galaxy Macau, part of the Galaxy Entertainment Group (GEG), is displayed at a news conference on the gaming resort's results in Hong Kong, China February 28, 2017. REUTERS/Bobby Yip

Galaxy, one of six listed casino operators in the Chinese territory of Macau, had been hit by sagging demand from high roller Chinese gamblers for more than two years due to a crackdown on corruption and slowing economic growth.

The former Portuguese colony, now a special administrative region belonging to China, is the only place in the country where citizens are legally allowed to gamble.

For the full year, Galaxy reported on Tuesday a net profit of HK$6.28 billion ($809 million), up from HK$4.16 billion in 2015. That compared with an average forecast of HK$5.96 billion from 19 analysts polled by Reuters.

Full-year revenue amounted to HK$52.8 billion, up slightly from HK$51 billion a year earlier as the casino market experienced a shift in the mix of gaming revenue from VIP to the mass market, the company said in a statement.

“We were encouraged by the last five months of 2016, where Macau experienced modest growth in gross gaming revenue (GGR). We hope that this will develop into a definitive trend over the course of 2017 and beyond,” it said in the statement to the Hong Kong stock exchange.

Deputy chairman Francis Lui said at an earnings press conference after the results that the company expected to post double digit growth in Macau gaming revenue in 2017.

Galaxy chief financial officer Robert Drake, also speaking at the earnings conference, said the company would continue to explore opportunities overseas, including in Japan.

Galaxy Entertainment Group (GEG) Chairman Lui Che-woo (R) and his Vice Chairman son Francis attend a news conference on the gaming resort's results in Hong Kong, China February 28, 2017. REUTERS/Bobby Yip

Multi-billion dollar casino openings by Sands China Ltd (1928.HK) and Wynn Macau Ltd (1128.HK) had helped attract VIP customers whose numbers have dwindled since the start of 2014 when the government began a campaign against shows of wealth by public officials.

The campaign and a slowing Chinese economy drove gambling revenue down in Macau for a third year in a row in 2016.

In January, gambling revenue rose 3.1 percent to 19.3 billion patacas ($2.4 billion), getting a boost from a national holiday at the end of that month.

Hong Kong-listed Galaxy said that for the first time in 10 years, overnight visitors to Macau had exceeded same-day visitor arrivals thanks to new hotel capacity.

Galaxy has the biggest land plot on Macau’s Las Vegas style Cotai strip where the $4 billion Wynn Palace and $3 billion Parisian property opened in the third quarter.

Galaxy still has around half of its land area to build out on Cotai and has said it will expand non-gaming facilities in the neighboring island of Hengqin.

Non gaming has emerged as a bigger priority for the multi billion operators as gaming revenues have declined and authorities try to wean the southern Chinese territory away from the casino industry towards more family friendly wholesome activities.

Shares of Galaxy closed up 0.3 percent ahead of the earnings announcement on Tuesday, beating a 0.8 percent rise for the benchmark Hang Seng Index .HSI.

Additional reporting by Donny Kwok; Editing by Muralikumar Anantharaman

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