HAITONG INT'L: Lowering GALAXY ENT (00027) target price to HK$41.5 and rating as "outperform" in line with quarterly performance expectations.

HAITONG INT'L has released a research report stating that GALAXY ENT (00027) performance in the first quarter met expectations, with continued growth in high-end business. In the first quarter, it achieved a net revenue of 12.4 billion Hong Kong dollars, up 10.7% year-on-year; adjusted EBITDA reached 3.58 billion Hong Kong dollars, up 8.5% year-on-year, with a corresponding adjusted EBITDA profit margin of 28.8%, down 0.6 percentage points year-on-year. Overall, the first-quarter performance meets market expectations. Referring to comparable company valuations, the bank gives Galaxy Entertainment a target price of 41.5 Hong Kong dollars in 2026 at 8.5 times EV/EBITDA, down from 47.3 Hong Kong dollars, and maintains an "outperform market" rating. GALAXY ENT's gross gaming revenue in the first quarter reached 12.73 billion Hong Kong dollars, up 16.4% year-on-year, with growth exceeding the industry average of 14%. High-end business continued to grow during the period, with VIP and high-end mass market business currently accounting for 53% of GGR; within the mass market business, the ratio of basic mass market to high-end mass market is about 55:45. Galaxy Entertainment's market share in the first quarter was 19.9%, down by 1.8 percentage points from the previous quarter, up 0.4 percentage points year-on-year, falling back to normal levels. The bank mentioned that Galaxy Entertainment's hotels, restaurants, and visitor numbers performed strongly during the May Day holiday period. The performance of the second fiscal quarter may be impacted by the World Cup in June and July, the company is adding concerts and events like UFC to attract customers, with net revenues estimated to be 51.723 billion, 56.205 billion, and 61.2 billion Hong Kong dollars respectively for the years of 2026 to 2028, representing year-on-year growth of 5%, 8.7%, and 9.6%. Adjusted EBITDA is projected to be 14.72 billion, 16.019 billion, and 17.428 billion Hong Kong dollars, with adjusted EBITDA profit margins of 28.5%, 28.5%, and 28.3%.