Citi: Maintains "Buy" rating on GALAXY ENT (00027) with a target price of HKD 44.

Citi released a research report stating that GALAXY ENT (00027) reported a net income of HKD 11.835 billion in the second quarter of this year, a year-on-year decrease of 2%. The adjusted EBITDA fell 5% year-on-year to HKD 3.38 billion, which is roughly in line with the bank's and market expectations. During the period, the group's EBITDA was impacted by unfortunate gaming results, dragging down the EBITDA by approximately HKD 21 million. Excluding this factor, the normalized adjusted EBITDA profit margin improved by 0.9 percentage points year-on-year to 31.4%. The board declared a mid-term dividend of HKD 0.9 per share (up from HKD 0.7 in the same period last year), implying a payout ratio of approximately 75% (compared to around 58% in the same period last year), which Citi considers a positive surprise. The bank maintains a "Buy" rating, with a target price of HKD 44. Citi pointed out that VIP gaming revenue fell 32% year-on-year to HKD 1.636 billion, mainly affected by a 4% decrease in betting volume and a lower win rate (3.1%); mass market gaming revenue rose 8% year-on-year to HKD 9.473 billion, driven by an increase in the win rate to 28%, though partially offset by a 3% decrease in betting volume. The group's gaming market share in the second quarter remained roughly flat at about 20.3%. Among them, EBITDA for Galaxy Macau fell 4% year-on-year to HKD 3.199 billion; if excluding the "unfortunate" factor, the normalized EBITDA increased by 10% year-on-year. Management revealed that gaming revenue in Macau was under pressure during the World Cup period but began to recover after the event, continuing into August. The group is focusing on its phase four development project (target completion in 2027), which will offer approximately 1,350 guest rooms and suites, a 5,000-seat theater, and other facilities. As of the end of June, the group held cash and liquid investments of approximately HKD 37.7 billion and net cash of about HKD 35.9 billion, maintaining a strong balance sheet.