HONG KONG - (Reuters) - Macau casino operator Galaxy Entertainment, posted a ninefold increase in first-half net profit, beating expectations as its new casino cashed in on a steady flow of Chinese visitors keen to try their luck in the world's largest gambling destination.
Although China's economic slowdown is threatening to rein in the flow of visitors that made Macau one of the fastest-growing economies in 2011, Galaxy is seen as better positioned than most rivals as its new casino benefits from high traffic on Macau's glitzy Cotai strip.
Galaxy Chief Executive Francis Liu told reporters he expected the industry's revenue growth rate to improve in the second half of the year, aided by seasonal factors such as better weather while new infrastructure in Macau would help it longer term. "We see a moderation in external economic factors and we believe those factors will be shortlived," he said.
The $12 billion company controlled by Hong Kong property tycoon Lui Che Woo and 13 percent owned by European private equity firm Permira, reported net profit of HK$3.5 billion ($445 million) for the first six months of the year, up from HK$378.3 million in the same period a year ago.
It was the first full 12 months of earnings for the company's new casino which opened in April last year.
The result was 23 percent better than an average forecast of HK$2.8 billion from five analysts polled by Reuters, with Galaxy helped by 36 percent growth in revenues from ordinary gamblers as well as 15 percent growth in revenues from VIP gamblers.
Macau, the only place in China where Chinese nationals can legally gamble in casinos, relies on the big-spending VIP punters for more than 70 percent of gambling revenue.
With total gambling revenues still rising, albeit at slower pace, and armed with the biggest piece of property on Macau's Cotai strip, Galaxy is now investing $2 billion in the second phase of its new Galaxy Macau resort which opened last year.
This will double its size on Cotai, adding Ritz Carlton and JW Marriott hotels, new retail and dining outlets as well as 500 extra gaming tables.
Rivals are not standing still and this year Sheldon Adelson's Sands China will unveil additions to its Sands Cotai Central, a $4.4 billion property that opened in April.
Analysts have predicted the new Sands Cotai opening will be relatively beneficial to Galaxy as long as visitors continue piling into Cotai- an area of land the government is trying to develop into an international leisure and tourism destination like Las Vegas.
"Sands is better positioned going into the second half of the year but I think Galaxy will be a beneficiary because as Sands gets increased traffic on the Cotai strip there will be a spillover into Galaxy," said Michael Ting, analyst at CIMB Group in Hong Kong.
Galaxy's shares were 3 percent lower, in line with industry peers after the results. They have risen almost 53 percent in the year to date, outperforming the benchmark Hang Seng Index which has climbed 7 percent in the same period.