The investment bank Morgan Stanley has lowered Galaxy Entertainment’s earnings forecast due to market share loss.
In the investment memo released on Tuesday, analysts noted that the market was expecting a market share gain after the opening of Phase 3 in 2H23, but ‘these did not materialize.’
As a result, Morgan Stanley has cut the stock’s target price by 17 percent to HK$38.0 on a 14 percent lower 2024 EBITDA. Meanwhile, it also trims EBITDA by 7-8 percent for 2025 and 2026 based on lower market share expectations.
The gaming operator Galaxy Entertainment Group officially opened Phase 3 in December last year, intending to establish a new cultural landmark in the gaming hub.
Galaxy Macau’s Phase 3 focuses on non-gaming elements, including the Galaxy International Convention Center (GICC), which has an area of approximately 40,000 square meters and a pillar-free exhibition hall spanning 10,000 square meters on the ground floor.
Morgan Stanley also mentions that 1Q24 will be a ‘negative catalyst,’ as analysts expect Galaxy’s 1Q24 corporate EBITDA to be at 2 percent quarter-to-quarter to HK$2.9 billion ($370 million), or 72 percent of 1Q19, and ‘weaker’ than the industry’s 5 percent quarter-to-quarter, or 81 percent of 1Q19. ‘This is driven by mass share loss and operating deleverage,’ it concludes.
Morgan Stanley also notes that may turn ‘more positive’ if they see a more visible trend of market share gains from 2H24.
‘Galaxy has a very strong track record in running and ramping up operations. Also, some investors favor its net cash position amid uncertain China macro.’it added.
