Galaxy spending $2 billion for new phase of Macau resort

HONG KONG Thu Apr 26, 2012 2:53am EDT

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HONG KONG (Reuters) - Macau casino operator Galaxy Entertainment Group Ltd (0027.HK) said on Thursday it plans to invest HK$16 billion ($2.06 billion) in the second phase of its latest resort in the world's largest gambling destination.

Home-grown Asian casino companies are stepping up their game and taking on Las Vegas gambling titans like Las Vegas Sands (LVS.N) and Wynn Resorts (WYNN.O) as they expand on their home turf.

Galaxy, controlled by Hong Kong property and construction businessman Lui Che Woo, said it plans to open the new phase by mid-2015. The projected date is likely to make it the next casino to open in the lucrative market and ahead of U.S. rivals, including Wynn Macau (1128.HK) and MGM China (2282.HK), who are still awaiting government approval for their developments.

The news comes just two weeks after Las Vegas mogul Sheldon Adelson's Macau unit, Sands China Ltd (1928.HK), opened the Sands Cotai Central casino a few hundred meters from Galaxy's property.

Armed with the biggest land-bank on Macau's developing Cotai strip, Galaxy's current casino on the strip accounts for just 25 percent of its total allocated space. The new phase will double its size.

Galaxy, which has a market capitalisation of $12 billion, is planning to expand its capacity by up to 500 tables and more than 1,000 slots with the new project.

Chief executive Francis Lui said the company had not yet entered into a formal agreement with the government for the number of tables, but he was confident it would be significantly accretive to earnings.

"ABUNDANT LABOUR"

Lui Che Woo, who is chairman of Galaxy, dismissed concerns that labour would be a problem in constructing the new phase, a problem that occurred in the rapid build-out of Macau a few years earlier.

"In the next few years labour will be more abundant. In 2012, 2013 there are not that many new projects opening," he said.

Casino players in the gambling enclave are racing to develop new properties to capture a larger slice of the Macau market, where gamblers spent $33.5 billion last year compared to Las Vegas, which took in $6 billion.

So far only Galaxy, Sands and Melco Crown (MPEL.O) (6883.HK), have a presence on the emerging Cotai strip, a reclaimed plot of land that the government is trying to develop into a global tourism and leisure hub.

Galaxy, 12.6 percent owned by European private equity firm Permira, will open two new luxury hotels, the Ritz-Carlton and the world's largest JW Marriott, as part of the project.

It will also expand retail space to more than 100,000 square meters and more than 200 luxury stores.

Robert Drake, chief financial officer, said no new equity would be issued and the casino would be financed through existing cash and debt.

Galaxy has already started construction and has 500 workers at present. Its golden turreted property was the only one to open in Macau last year, helping it to significantly increase its market share over the past 12 months.

Galaxy Entertainment's shares were up 4.6 percent on Thursday, outpacing a 0.5 percent gain in the benchmark Hong Kong index .HSI. Its shares have gained more than 65 percent so far this year.

An undisclosed institutional investor in Galaxy sold about a $141 million stake in the company this week, a source familiar with the matter told Reuters.

Macau, the only place where Chinese nationals are legally allowed to gamble in casinos, said gambling revenue surged 24.4 percent in March to 25 billion patacas ($3.1 billion), in line with forecasts.

(Editing by Anne Marie Roantree and Matt Driskill)

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