Goldman Sachs: Galaxy Entertainment (00027) Gambling recovers after the World Cup and maintains a healthy “buy” rating

The Zhitong Finance App learned that Goldman Sachs released a research report saying that Galaxy Entertainment (00027) management was cautiously optimistic about the business prospects at the Goldman Sachs Asia Leaders Conference. Affected by the World Cup, which expanded to 48 teams, after a brief setback in June to July, the daily gambling revenue rate has rebounded sharply to MOP 710 million to MOP 720 million in recent weeks. The year-on-year decline narrowed to 1% in August, and 12% and 8% year-on-year in June and July, respectively. The bank maintains Galaxy Entertainment's “buy” rating, with a target price of HK$51 for 12 months.

The bank pointed out that the company believes that the tightening of capital controls will have little impact on the gambling revenue trend, since the average daily theoretical loss of most midmarket high-end customers is only about HK$25,000 to HK$50,000; the company has also signed strategic partnerships with HSBC Credit Card, Ant Bank, and Xiaohongshu to deepen customer participation and expand coverage.

In terms of competition, management said the market is still quite competitive, especially in the high-end segment, but the player reinvestment rate has generally stabilized in recent months. The bank believes that Sands China's new CEO's focus is more on cost optimization rather than short-term, more aggressive promotion; if implemented smoothly, it will steadily recover to close to MOP 730 million to 740 million per day, or pose an upward risk to EBITDA profit margins. Channel checks showed that Galaxy Entertainment's share of the gambling closing market remained around 22% in August, while Sands China rebounded to 26%, while Melco and Australian Expo were weak. The fourth phase of the Galaxy Macau project of about 6 million square feet is undergoing internal renovation. It is expected to be completed in 2027. The total capital expenditure budget is about HK$35 billion, and more than half has been invested, leaving HK$15 billion to HK$16 billion; along with the Star Hotel renovation, the company guidelines total capital expenses for 2026 to 2028 will be 5.3 billion, 12.5 billion and HK$5 billion respectively, which can be covered by HK$35.9 billion in net cash as of the end of the second quarter of 2026.

In terms of shareholder returns, the Group's dividend per share for the first half of 2026 has been raised to HK$0.9. This is the third consecutive increase in the past one to two years. The dividend payment cycle has also been accelerated from 55 business days to 24 days. The bank believes that HK$0.9 may be the minimum dividend limit for future dividends. A strong balance sheet and cash flow can further support dividend growth. In terms of valuation, the current price is equivalent to about 8 times the EV/EBITDA forecast for 2026, and the return on recurring free cash flow is about 9%, which is roughly in line with the industry average. The bank believes that the current valuation does not fully reflect the potential upward trend in the fourth period, and that the valuation is attractive.