Morgan Stanley: Maintains "Market Perform" rating on GALAXY ENT (00027), target price raised to HKD 36.

Morgan Stanley has released a research report stating that, in response to the 1% upward adjustment in the EBITDA forecast for GALAXY ENT (00027) for this year, a 5% downward adjustment in the non-gaming capital expenditure forecast, and a 32% upward adjustment in the net interest income forecast, the predicted free cash flow yield has been revised upward by 4%. Consequently, the target price has been raised from HKD 34 to HKD 36, while maintaining a rating of "in line with the market." Morgan Stanley has also increased its annual per-share dividend forecasts for Galaxy Entertainment from 2026 to 2028 by 30%, 19%, and 17%, respectively, with the payout ratio forecast adjusted from 60% to 75%. After adjustments, the EBITDA forecasts for the properties from 2026 to 2028 are projected to be HKD 15.4 billion (a year-on-year decrease of 2%), HKD 16.3 billion (a year-on-year increase of 6%), and HKD 17.7 billion (a year-on-year increase of 8%). Morgan Stanley believes that since the pandemic, Galaxy Entertainment's strong net cash position, along with the growth potential of the Galaxy Macau Phase 3 and Phase 4 projects, grants it a higher valuation premium compared to its peers. However, any further rise in the stock price will depend on upward revisions to earnings forecasts.