Goldman Sachs: Expects GALAXY ENT (stock code 00027) to have sufficient financial capabilities to further increase dividends, but lowers target price to 53.4 Hong Kong dollars.

Goldman Sachs released a research report stating that it maintains a "buy" rating on GALAXY ENT (00027) and will use a classification and summing valuation method to lower the 12-month target price from 54 Hong Kong dollars to 53.4 Hong Kong dollars. The stock is currently not high in valuation, equivalent to a multiple of enterprise value forecast for the 2026 fiscal year of 10 times. GALAXY ENT announced its full-year performance as of the end of December last year on the 26th, with fourth-quarter performance strong, as expected by Goldman Sachs. EBITDA increased by 29% quarter-on-quarter to 4.3 billion Hong Kong dollars, in line with the bank's expectations and at the upper limit of the market consensus of 3.6 billion to 4.3 billion Hong Kong dollars. The Group announced a final dividend of 0.8 Hong Kong dollars per share, equivalent to a payout ratio of 64% for the second half of 2025, higher than the 58% in the first half of 2025 and 50% in the 2024 fiscal year. Management stated that they intend to distribute at least 65% of profits in the future. Goldman Sachs believes that the Group has sufficient financial capacity to further increase dividends or adopt a progressive dividend policy like Sands China (01928) due to the 18 billion Hong Kong dollar capital expenditure balance for the fourth phase of Galaxy Macau, which should be fully covered by its strong free cash flow and 35 billion Hong Kong dollar net cash reserves. Goldman Sachs noted the upcoming National People's Congress and Chinese People's Political Consultative Conference from March 4th to 11th, which may potentially impact the demand for gambling and tourism. In terms of performance, Goldman Sachs slightly adjusted its EBITDA forecast for the 2026 to 2027 fiscal years for Silver Entertainment by less than 1%. Goldman Sachs also pointed out that while the Group has achieved its goal of a 22% market share of total gaming revenue in the medium term, there is still room for further growth in the future, considering the ongoing progress of the third phase project (such as the Grand Lisboa Hotel), the renovation of the StarWorld Hotel, and the phased opening of the fourth phase project of Galaxy Macau starting next year.