Galaxy has “enough liquidity” to face crisis

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.”