Table of Contents
Financial Ratios with industry comparison
Macau Gaming Market Analysis
Galaxy Entertainment Group (GEG), wholly owns Galaxy Casino S.A., a gaming concessionaire that received a gaming concession from the Macau SAR government from 2002 to 2022. As of today, GEG owns and operates StarWorld Hotel and City Club Casinos in Macau. GEG is developing an integrated leisure and entertainment resorts in Cotai – Galaxy Macau. Opened on May 2011. GEG (0027.HK) was listed on the main board of Hong Kong Stock Exchange in 1991. GEG’s management has delivered outstanding results in the past and has demonstrated impressive strategic moves at critical moments. GEG make more independent decisions for the long-term benefit of the company and shareholders. GEG obtained the approval for the largest contiguous land bank in Macau for gaming. And the capacity expansion has been typically accomplished by borrowings, without diluting shareholders returns. Their willingness to take risk and add capacity paid off, with exponential growth in shareholder’s equity. GEG’s conservation of resources has proved its long-term oriented strategy, which we see is an important asset for GEG’s further outperformance
Financial Ratios with Industry Comparison
Sands China and SJM’s Holdings are the good industry comparison for GEG as they are the top three operators with combined market share of 61 percent the whole Macao gaming industry. In 2011 the market leader was SJM Holdings with a 29 percent share and GEG and Sands China both have 16 percent respectively. There are key similarities among all three operators.
Location - Sands China and GEG with casinos operating on Cotai Strip currently with landbank
Market Share – Mass market revenue and VIP market share in 2011
VIP market – SJM’s 28%; GEG’s 18%; Sands China’s 12%, VIP market is a main revenue drive in Macau gaming sector which is equivalent to 73% of Macau Gross Gaming Revenue according to DICJ 2011 data (See Chart A)
Mass market – SJM’s 36%; GEG’s 10%; Sands China’s 25%, it considers a market segment with highest profit margin as it eliminates junket commission
Target Customers - Both SJM’s and GEG’s are Chinese-based company, owners and operators are in Greater China and their target customers are focused on China and Asian market The selected key ratios for evaluating the financial performances are based on the uniqueness of gaming industry and the accounting figures for ratio analysis are based on the result of GEG’s Annual Report 2009-2011, SJM’s and Sands China’s Annual Report 2011with calculations listed in Table 1: Current ratio measures the company short term liquidity and the ability of a firm to meet its short terms obligations as they incur. Calculating quick ratio is less essential as inventory plays a less important role in gaming industry and the inventory amount in the balance sheet is relatively small. Generally the outcomes for current ratio are close to the quick ratio in Macau gaming industry and it is a common practice to focus on the current ratio solely for liquidity measure. Leverage is always one of the main concerns for investors, to see the correlation between the portion of financing items with company assets and shareholders’ fund. Several leverage ratios were used such as debt to equity ratio, gearing ratio and debt to assets ratio and assets to equity ratios to measure the company’s overall financial risk. These ratios let investors to see how much GEG relies on financing relative to stockholders’ equity, its assets or creditor’s fund. Gaming industrial practice is more emphasized on the net debt to equity ratio for analysis the total borrowings of the company relative to shareholders’ equity as casino operators need financing to support its massive future development...
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