Galaxy has “enough liquidity” to face crisis

Galaxy operates two casinos and other small venues in Macau.
Galaxy operates two casinos and other small venues in Macau.

JP Morgan analysts say the company could survive for more than six years with near zero revenue.

Macau.- Casino operator Galaxy Entertainment Group Ltd has “enough financial liquidity to survive” in the Macau market during the Coronavirus pandemic, according to a report from JP Morgan Securities (Asia Pacific) Ltd.

The report also noted that Galazy had enough reserves to withstand “near-zero revenue” for as long as six years.

The report also noted that Macau’s other gaming operators have “ample liquidity to survive this unprecedented period of ‘near-zero revenue’ for over a year,” analysts DS Kim, Derek Choi and Jeremy An wrote.

They estimate that Galaxy Entertainment has fixed operating costs of US$3million per day – which the brokerage projected as approximately US$90million per month; and maintenance capital expenditure (capex) of US$11million per month.

The company owns and operates two flagship properties in Macau – Galaxy Macau on Cotai, and StarWorld Hotel on the city’s peninsula – as well as smaller venues in both districts.

In its full-year results published in late February, Galaxy Entertainment said it had net cash of HKD51.7billion (nearly US$6.7billion) and only HKD600 million in debt.

The group does have financial commitments on Phases 3 and 4 of Galaxy Macau, and also has ambitions to acquire a casino licence in Japan.

Regarding all of Macau’s JP Morgan noted: “The industry can stay EBITDA [earnings before interest, taxation, depreciation and amortisation] break-even at the gross gaming revenue run-rate of around MOP300 million [US$37.6million] per day, and cash-flow break-even (post interest cost and maintenance capex) at MOP400-million levels.”

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