Galaxy’s Q2 Negative EBITDA Expected, Solid Balance Sheet Positions It Well Amid COVID-19 Headwinds

In line with Macao peers, Galaxy’s second quarter continued to reflect COVID-19 headwinds, with adjusted EBITDA turning to a loss of HKD 384 million, after eight consecutive quarters of above its breakeven levels. This was still better than Bloomberg consensus of HKD 509 million, on the back of cost-cutting efforts. Although China's zero-COVID-19 strategy may continue to hinder Macao’s tourism demand, and near-term recovery visibility remains low, policies are being tweaked to match reduced COVID-19 severity and we expect a gradual relaxation of border restrictions in the coming quarters. We retain our long-term constructive outlook for Macao's gaming sector, and maintain our assumption for Macao’s gross gaming revenue, or GGR, to return to 60% of 2019 levels in 2023, with a full recovery by the end of 2024.