Galaxy Entertainment has announced 3Q26 operating data: net revenue was HKD12,692mn (+4% YoY), adjusted EBITDA was HKD3,688mn (+10% YoY), and the adjusted EM rose by 1.6pp YoY to 29.1%. During the quarter, Macau SAR market GGR fell by 4% YoY, while the company’s GGR rose by 5% YoY, outperforming the industry, driven by higher hold rates. The company disclosed that the higher hold rates in 3Q contributed c. HKD584mn to EBITDA; excluding this, adjusted EBITDA fell by 7% YoY to HKD3,104mn. For 3Q26, rolling chip volume was still somewhat disrupted by the World Cup, and VIP business also faced near-term pressure from increasingly cautious customer sentiment amid the ongoing normalization of cross-border wealth management. We think that the Macau SAR gaming industry continues to move along the path of declining VIP share and steady mass recovery, with the integrated entertainment ecosystem becoming increasingly important. We are positive on Galaxy’s competitive edges in premium mass, hotels, and entertainment facilities. Maintain BUY.
Considering the slower-than-expected recovery in Macau SAR gaming demand, we lower our 2026/2027/2028 adjusted EBITDA forecasts by 9/8/8% to HKD14.6/16.0/17.4bn. Referencing the average 2027E EV/EBITDA of 7.6x for H-share gaming operators on Bloomberg consensus (previous: 8.5x 2026E), and considering the company’s solid premium mass position, Capella’s continued ramp-up, the increasingly rich non-gaming ecosystem, and the medium-to-long-term growth potential from Galaxy Phase IV, we assign 10.6x 2027E EV/EBITDA (previous: 11.5x 2026E), deriving our target price of HKD47.90 (previous: HKD50.0). Maintain BUY.