By Kate O'Keeffe
HONG KONG--Macau gambling company Galaxy Entertainment Group
Ltd. said Wednesday that it recently signed a framework agreement
to build a 10 billion yuan ($1.6 billion) resort on a nearby island
China hopes to transform into a thriving city at the heart of the
Pearl River Delta.
Unlike Galaxy's megaresorts in Macau, which has ballooned into a
$45 billion gambling market, this project wouldn't have a casino.
The rationale for building the resort, the first such project set
to be built by one of Macau's six casino operators, is to
complement Galaxy's business in the territory, differentiate it
from competitors and help develop Macau into a global tourism
center, the company said.
The project could also score the company political points with
China, which has embarked on an ambitious plan to turn sleepy
Hengqin Island, located across a narrow waterway from Macau, into a
diversified hub to augment its neighbor, the world's casino
capital.
In 2005, U.S. casino company Las Vegas Sands Corp. unveiled a
plan to invest more than $1 billion in a new nongambling convention
center, hotel, and retail complex in Hengqin, but it never
materialized.
Hengqin's future was unclear until 2009 when Xi Jinping, then
vice president of China, said the central government had decided to
develop the island, which is three times the size of Macau and
located at the crossroads of that city, Guangdong and Hong Kong.
Later that year, China approved a plan to build the University of
Macau's new campus, a $1.3 billion pilot project, on Hengqin.
Since then, many other projects have been announced, including a
massive marine-themed resort built by Guangdong Chimelong Group Co.
that opened earlier this year. Property-to-ports conglomerate Shun
Tak Holdings Ltd.--run by Pansy Ho, the daughter of Macau gambling
patriarch Stanley Ho--recently unveiled plans to build a Hengqin
project with hotel, office and residential components.
In total, there are plans for more than 50 projects in Hengqin
across seven industries including tourism, financial services,
education and technology, according to a Chinese government website
about the island. Hengqin has attracted more than CNY226 billion
($36.5 billion) in investment, according to the site.
Galaxy's luxury resort, which is planned to be built along
Hengqin Island's waterfront on a 2.7 square kilometer piece of
land, could incorporate "bungalows like the Maldives," said Deputy
Chairman Francis Lui.
The casino operator also said its net profit grew 36% to 10.1
billion Hong Kong dollars (US$1.3 billion) last year, and it
declared a special dividend of HK$0.7 a share. After the release of
the results, which included a fourth quarter that slightly missed
analyst estimates, shares of Galaxy fell 2.7% to HK$72.10 on the
Hong Kong Stock Exchange.
Next year, Galaxy plans to open the second phase of its flagship
property in Macau's Cotai area, nearly doubling the size of that
massive casino-resort. All five of Galaxy's competitors--Las Vegas
Sands, Wynn Resorts Ltd., MGM Resorts International, SJM Holdings
Ltd. and Melco Crown Entertainment Ltd.--are also planning to open
new casino-resorts in Cotai over the next few years.
Grant Govertsen, an analyst at Union Gaming Group, called
Galaxy's development pipeline in Macau and Hengqin "second to
none," reiterated his buy rating on the company and raised his
price target to HK$89 from HK$67.
Amid talk of casino expansion in places such as Japan, South
Korea and Taiwan, Galaxy said it is also looking for partners to
build overseas, without elaborating.
Write to Kate O'Keeffe at kathryn.okeeffe@wsj.com
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