CICC: Maintains "Outperform" rating on GALAXY ENT (00027) with a target price of 44.10 Hong Kong dollars.

CICC released a research report stating that it maintains the EBITDA forecast for GALAXY ENT (00027) for 2026 and 2027. The current stock price of the company corresponds to 8 times the 2026 EV/EBITDA (treating financial assets as cash). The bank maintains an "outperform industry" rating with a target price of HK$44.10, corresponding to 11 times the 2026 EV/EBITDA (treating financial assets as cash), providing a 36% upside potential from the current stock price. Key points from CICC: 1Q26 performance in line with Visible Alpha expectations GALAXY ENT announced 1Q26 revenue of HK$12.396 billion (11% year-on-year growth, 10% quarter-on-quarter decline), returning to the level of 95% of 1Q19; adjusted EBITDA was HK$3.576 billion (8% year-on-year growth, 17% quarter-on-quarter decline), returning to 90% of 1Q19, and basically in line with Visible Alpha's expectation of HK$3.526 billion. The bank believes that GALAXY ENT's performance was mainly affected by the normalization of gaming win rates in 1Q26. 1Q26 average fixed operating costs were approximately US$3.7 million (unchanged from 4Q25), mainly driven by continued cost control efforts and efficiency improvements. Capital expenditure in 1Q26 was HK$900 million, with management expecting full-year capital expenditure for 2026 to be around HK$10-11 billion. Management indicated that high-end mass market accounted for 45% of mass market gaming revenue; however, the bank noted that mass market gaming revenue accounted for 75.4% of total gaming revenue. The bank believes that Galaxy will continue to target high-end mass market customers to drive the development of the Phase IV project. The threshold for high-end mass market customers is customers with an Average Daily Theoretical Win (ADT) of over HK$10,000 to HK$15,000. While management believes that the Intercontinental Hotel can attract customers from city clubs, its business performance in 1Q26 remained weak, with a market share of approximately 2.3% in 1Q26 (compared to 2.2% in 4Q25). Management believes that the Middle East conflict has not directly affected the company's business, but the company anticipates seasonal disruptions during the 2026 World Cup. Risk warning: New property deliveries fall below expectations; increased competition may lead to market share loss.