Galaxy Entertainment's Dividend Strategy: A Closer Look

The financial strategy of Macau casino operator Galaxy Entertainment Group Ltd has been under scrutiny, particularly concerning its dividend payout policy. The brokerage firm JP Morgan Securities (Asia Pacific) Ltd indicates that the current 60 percent dividend payout might just be a stepping stone rather than a limit for the company. This insight comes after a detailed analyst meeting following Galaxy's first-half earnings report, which showcased a noteworthy increase in profits.

Galaxy Entertainment's net profit surged by 19.4 percent compared to the previous year, reaching HKD5.24 billion (US$667.6 million). Consequently, the group declared an interim dividend of HKD0.7 per share, to be distributed on October 31. A senior analyst, Vitaly Umansky from Seaport Research Partners, highlighted in his memo the consistent escalation in dividends, noting, "Galaxy had previously announced a HKD0.50 final dividend to be paid in June (following HKD0.80 in dividends paid in 2024) and has now announced a HKD0.70 interim dividend payable in October." His observations suggest the potential for further dividends as operational cash flows improve.

JP Morgan analysts, DS Kim and Selina Li, emphasized Galaxy's dedication to returning capital to shareholders sustainably. They reported that management felt confident in increasing the payout ratio to around 60 percent after analyzing the company's free cash flow and capital expenditure forecasts. They also mentioned, "Management … will review the situation at year-end and in the future to see if there is room for further and sustainable increases, which suggests to us that 60 percent is not the ceiling, especially into 2027, 2028, when its capex for Phase 4 will taper off."

Future Investment and Expansion Plans

Investment in Galaxy Entertainment continues to be a priority, as noted by Jefferies Hong Kong Ltd. Their recent memo highlighted the company's revised payout policy, increasing from 30 percent in the first half of 2023 to 50 percent for the first half of 2024, subsequently rising to 58 percent for the first half of 2025. Anne Ling and Jingjue Pei from Jefferies also remarked on management's expectation of under HKD4-billion in capital expenditures for the second half of 2025, accumulating a total of HKD7 billion for the entire year.

Francis Lui Yiu Tung, Galaxy Entertainment's chairman, revealed in their earnings statement the anticipated completion of Galaxy Macau Phase 4 by 2027. This development will encompass new hotel brands, a 5,000-seat theatre, expanded dining and retail spaces, and a casino. As of June 30, Galaxy reported having HKD30.7 billion in cash and liquid investments, accompanied by "minimal debt," as highlighted by Mr. Lui. These financial moves position Galaxy Entertainment for sustained growth and competitive advantage in the Macau gaming market.

Competitive Landscape and Market Dynamics

The competitive landscape of Macau's casino industry is a major focus for Galaxy Entertainment. Their main gaming operations are based in Galaxy Macau, Cotai, and StarWorld Hotel on the Macau peninsula. Brokerage analyses note Galaxy's efforts in securing market share, achieving a 20.2 percent stake in the second quarter, marking their strongest position since the pre-Covid era.

Seaport Research Partners observed an uptick in player reinvestment on a quarter-on-quarter basis for Galaxy, aligning with industry trends. They anticipate continued growth, asserting that despite the competitive market, player reinvestment is stabilizing in the latter half of the year. Similarly, Jefferies’ findings suggest intense competition, but not an erosion in business performance, stating that "management thinks the competition is intense but has not deteriorated year-to-date." The memo also noted an alignment in commission increases with a 20 percent growth in VIP volume quarter-on-quarter.

JP Morgan reinforced that, according to management, competition levels have remained "quite stable" over the recent quarters, a sentiment echoed by other industry peers during their second-quarter 2025 reviews. Jefferies provided additional insights into Galaxy’s strategy to enhance yield from its gaming inventory. Scheduled remodelling at StarWorld aims to transition the property to be more appealing to mass-market players by relocating 100 tables to Galaxy Macau. Plans for this remodel were discussed in the third-quarter 2024 results, which included upgrading Level 3 at StarWorld with a considerable number of live electronic table game terminals, making it one of the largest in Macau’s market.

Source: Galaxy Ent dividend payout ratio has steadily risen, may exceed 60pct:analysts, GGRAsia, August 13, 2025.

Posted by Wizard
Aug 14 2025