Goldman Sachs: GALAXY ENT (00027) has a healthy recovery momentum in gambling revenue after the World Cup; maintains a "Buy" rating.

Goldman Sachs released a research report stating that the management of GALAXY ENT (00027) expressed cautious optimism about the business outlook at the Goldman Sachs Asia Leadership Conference. Influenced by the expansion of the World Cup to 48 teams, Macau's gaming revenue briefly experienced a setback in June and July, but in recent weeks, the daily gaming revenue has sharply rebounded to around 710 million to 720 million Macau Patacas. The year-on-year decline in August narrowed to 1%, while June and July saw year-on-year declines of 12% and 8%, respectively. The bank maintains a "Buy" rating for GALAXY ENT, with a 12-month target price of HKD 51. The bank noted that the company believes the tightening of capital controls has little impact on the gaming revenue trend, as the average theoretical daily loss for most high-end customers is only about HKD 25,000 to 50,000. The company has also established strategic cooperation with HSBC credit cards, Ant Bank, and Xiaohongshu to deepen customer engagement and expand coverage. In terms of competition, management indicated that market competition remains quite intense, especially in the high-end segment, but the reinvestment rate among players has generally stabilized in recent months. The bank believes that the focus of the newly appointed Chief Operating Officer of Sands China leans more towards cost optimization rather than more aggressive short-term promotions. If execution goes smoothly, with gaming revenue steadily climbing back to around 730 million to 740 million Macau Patacas daily, it may pose an upward risk to EBITDA margins. Channel verification shows that GALAXY ENT's market share in gaming revenue for August held steady at around 22%, Sands China rose to 26%, while Melco Resorts and MGM China appeared softer. The Galaxy Macau Phase 4 project, covering approximately 6 million square feet, is currently undergoing internal renovations, expected to be completed by 2027, with a total capital expenditure budget of about HKD 35 billion. Over half has already been invested, leaving HKD 15 billion to 16 billion; along with the renovation of the Starlight Hotel, the company guided total capital expenditures for 2026 to 2028 to be HKD 5.3 billion, 12.5 billion, and 5 billion respectively, which can be covered by net cash of HKD 35.9 billion as of the end of the second quarter of 2026. Regarding shareholder returns, the group's interim dividend per share for the first half of 2026 has been raised to HKD 0.9, marking the third consecutive increase in the past one to two years. The dividend payment cycle has also accelerated from 55 business days to 24 days. The bank believes that HKD 0.9 may become the lower limit for future dividends, with a strong balance sheet and cash flow further supporting dividend growth. In terms of valuation, the current price is equivalent to a projected EV/EBITDA of about 8 times for 2026, with a recurring free cash flow yield of about 9%, roughly in line with the industry average. The bank believes that the existing valuation does not fully reflect the potential upside from Phase 4, making the valuation attractive.