Galaxy Sees a Strong Start to 2023, Galaxy Macau Phase 3 to Open Progressively in Q2

Galaxy’s fourth-quarter EBITDA loss was well expected, and we’re encouraged by the company’s strong Lunar New Year performance, with mass gaming volume returning at 100% of 2019 levels and retail sales hitting an all-time high. Post-holiday demand is also robust, and management indicated its properties have generated HKD 1 billion EBITDA during the first one and a half months of 2023, almost doubling the three-month EBITDA of HKD 575 million in first-quarter 2022. We think these positive data points confirm a solid recovery of the Macao gaming sector, and the company’s plan to open its Galaxy Macau Phase 3 project further demonstrates management’s confidence on the demand outlook. We maintain our assumption of industry gross gaming revenue, or GGR, returning to 50% of 2019's level in 2023, up from 14.4% in 2022. We raise our fair value estimate for Galaxy to HKD 51.00 per share from HKD 49.50, after updating property opening schedule and rolling our model one year forward. Our tweaks of the earnings forecast are minor, we expect adjusted EBITDA of HKD 10 billion in 2023, or 61% of 2019 levels. We think the shares are fairly valued as of the Feb. 24 market close.