Goldman Sachs has expressed cautious optimism regarding the business outlook for Galaxy Entertainment (00027) following recent discussions with its management at the firm's Asian leadership conference.
According to the brokerage's research note, Macau's daily gross gaming revenue (GGR) run-rate has rebounded sharply to between MOP 710 million and MOP 720 million in recent weeks, after suffering a brief setback in June and July due to the impact of the expanded 48-team FIFA World Cup. This recovery has narrowed the year-on-year decline in August to just 1%, compared with drops of 12% and 8% recorded in June and July, respectively.
Goldman Sachs has maintained its "Buy" rating on Galaxy Entertainment with a 12-month target price of HKD 51. The company indicated that tighter capital controls have had minimal impact on GGR trends, noting that the average daily theoretical loss for most premium mass-market customers is only around HKD 25,000 to HKD 50,000. Furthermore, the group has entered into strategic partnerships with HSBC Credit Cards, Ant Bank, and Xiaohongshu to deepen customer engagement and broaden its reach.
On the competitive front, management acknowledged that market competition remains intense, especially in the premium segment, although player reinvestment rates have largely stabilized in recent months. The broker believes that the new Chief Operating Officer at Sands China is placing greater emphasis on cost optimization rather than short-term aggressive promotions. If executed well, this could pose an upside risk to EBITDA margins as GGR steadily recovers towards the MOP 730 million to MOP 740 million daily level.
Channel checks reveal that Galaxy Entertainment's market share held steady at approximately 22% in August, while Sands China rebounded to 26%. In contrast, Melco Resorts and SJM Holdings showed softer performance during the period.
Regarding the group's expansion plans, the approximately 6 million square feet Phase 4 development in Cotai is currently undergoing interior fitting-out works, with completion targeted for 2027. The total capital expenditure budget stands at around HKD 35 billion, of which more than half has already been deployed, leaving HKD 15 billion to HKD 16 billion outstanding. Including the renovation of the StarWorld Hotel, the company has guided for total capex of HKD 5.3 billion, HKD 12.5 billion, and HKD 5.0 billion for 2026, 2027, and 2028, respectively. These outlays can be comfortably covered by its net cash position of HKD 35.9 billion as of the end of the second quarter of 2026.
On shareholder returns, the group has raised its interim dividend per share for the first half of 2026 to HKD 0.90, marking the third consecutive increase over the past one to two years. The dividend payment cycle has also been accelerated from 55 business days to just 24 days. The broker views the HKD 0.90 level as potentially serving as a future dividend floor, with its robust balance sheet and strong cash flow generation providing further support for dividend growth.
From a valuation perspective, the current share price implies approximately 8 times forward 2026 EV/EBITDA, with a recurring free cash flow yield of around 9%, broadly in line with the industry average. Goldman Sachs believes the existing valuation fails to fully reflect the potential upside from Phase 4, making the current valuation level attractive for investors.