Macau casino operator Galaxy Entertainment Group Ltd expects to maintain a smaller workforce relative to pre-pandemic staffing, even after it fully opens Phase 3 of its Galaxy Macau resort on Cotai. That is according to Monday commentary by several brokerages, citing management remarks that day, following release of selected first-quarter data.
The company reported first-quarter adjusted earnings before interest, taxation, depreciation and amortisation (EBITDA) of just below HKD1.91 billion (US$244.2 million).
According to notes from analysts, Galaxy Entertainment’s management expects to have approximately 19,000 employees, down about 14 percent from circa 22,000 pre-Covid.
That would be “despite approximately 25 percent higher room count, suggesting significant efficiency gains,” stated JP Morgan Securities (Asia Pacific) Ltd in its Monday note on the latest management guidance.
Analysts DS Kim and Mufan Shi added: “Since staff costs account for about 80 percent of total cash operating expenses in Macau, this should bring in a substantial margin boost as volumes fully recover.”
Galaxy Entertainment’s 2019 annual report mentioned 22,000 employees as of December 31 that year – including at that time staff at three satellite venues known as City Clubs – and staffing costs, excluding director emoluments, amounting to just over HKD7.78 billion.
For the 12 months to year-end 2022, the group employed approximately 17,000, and had associated costs of just above HKD5.62 billion excluding director fees.
The difference in staffing between 2019 and 2022 was circa 13.6 percent, and the 2022 staffing costs were 27.7 percent below the pre-pandemic trading year.
JP Morgan also noted that for Galaxy Entertainment group wide in Macau, all its current room inventory was “back in the market”, versus “only 60 percent in the first quarter,” as the firm had “successfully hired and trained required non-gaming staff in recent months”.
A note from UBS AG following management’s Monday remarks, mentioned Phase 3’s Raffles at Galaxy Macau hotel, with 450 suites, would open “later this year,” and that another hotel for that phase – Andaz Macau, with circa 715 rooms – would “launch in fourth quarter 2023”. This would bring the “total room count” at Galaxy Macau to “around 6,000” said UBS analysts Angus Chan, Perry Yeung, and Ryan Lau.
At the beginning of May, Galaxy Entertainment had mentioned to GGRAsia, in response to our enquiry, that Raffles at Galaxy Macau and Andaz Macau were likely to open respectively in the “second half” this year.
On Monday, Galaxy Entertainment had reiterated that Phase 3’s Galaxy International Convention Center had a “soft opening” in April, hosting its first large-scale event. The 16,000-seat Galaxy Arena also had a soft opening in April, and it hosted two concerts by South Korean pop group Blackpink last weekend.
Brokerage CLSA Ltd stated in a Monday note that Galaxy Entertainment’s recovery had continued in the second quarter, “with strength across all gaming segments”.
CLSA analysts Jeffrey Kiang, Samantha Chin and Stella Liu also observed, citing the casino firm’s management: “Non-gaming events – concerts – resulted in a ‘big spike’ in retail sales, further supporting the recovery.”
Citigroup analyst George Choi wrote in a Monday note: “On the earnings call, management said that this past weekend, when Blackpink performed at Galaxy Arena, was Galaxy’s best weekend since Golder Week, in terms of both gaming and non-gaming.”
He added: “This comment reconfirms our view that if a casino operator has the right non-gaming amenities and spends on the right non-gaming events, it could effectively and add an extra Golden Week to its calendar, translating into market share gain and outperformance in EBITDA recovery versus peers.”
