Fears about the future of gaming in Macau, brought on by a change in the Beijing political structure, have not entered the thinking of Galaxy Entertainment Group Ltd. or its leader, Lui Che-woo. The company has announced plans to spend up to $6.5 billion to expand its Cotai Resort.
Calling it Phase 3 in its Cotai development plans, Galaxy said it would begin construction on the project toward the end of 2013 or the beginning of 2014. The construction will cover about 10 million square feet and is being conducted to protect the company’s investment against increasing competition.
“Galaxy will continue to do well in the short run,” said Jeremy Tan, a Hong Kong-based analyst who was quoted by the Macau Daily Times.
“But, there may be an oversupply in the market after 2017,” he said.
That is when new properties owned by Wynn Macau Ltd., MGM China Holdings Ltd., SJM Holdings Ltd. and Melco Crown Entertainment Ltd. are expected to be operating.
Galaxy’s announcement comes after stories that the Chinese economy was slowing or that the new regime in Beijing would clamp down on gaming.
Analysts now say both rumors appear false. The most recent signs, say analysts, indicate that the Chinese economy is regaining its footing and although the country’s leaders may target such things as money laundering, it will have no effect on Macau’s gaming revenues.
Galaxy says it plans to fund its expansion through internal resources and debt facilities, if needed. However, the company has more than $1.25 billion in cash on hand and continues to show a strong cash flow from operations.
Ray Poirier is the longtime executive editor at GamingToday.
Contact Ray at [email protected].