Thank you for holding. Welcome to the Galaxy Entertainment Group's management update for the second quarter and half year results of 2023. Joining us today are Mr. Ted Chan, Chief Financial Officer, Mr. Roland To, Senior Director of Strategic Planning, and Mr. Peter Caveny, Assistant Senior Vice President of Investor Relations. At this time, all participants are in listen-only mode. The presentation will be followed by a question-and-answer session, and instructions will be provided at that time. This conference is being recorded. I would now like to pass to Mr. Chan for presentation. Mr. Chan, please go ahead. Thank you.
Thank you, operator. Welcome, welcome everyone, and thank you for joining us for the update call on GEG's Q2 2023's results. Joining me here on today's call is Roland To and Peter Caveny. Copies of our media release, stock exchange announcement, and PowerPoint presentation are available on our website, which also include our customary disclaimers. Macau has experienced a rapid rebound following the relaxation of travel restrictions in early January this year. We are pleased to see continuing growth in Q2 in gaming revenue, effectively full hotel occupancy even after increasing hotel room count. Retail remains solid, food and beverage remains strong. Q2 2023, GEG reported EBITDA of $2.5 billion versus $384 million EBITDA loss in Q2 2022, and $1.91 billion in Q1 2023.
A small luck catch-up in Q2 increased our EBITDA by $4 million. Our flagship property, Galaxy Macau's mass gaming revenue, was close to 2019's level. Moreover, retail mall rents exceeded 2019's level by 36%, and hotel revenues reached 87%. We are pleased that our board approved a special dividend of $0.20 per share, payable in October this year. Our special dividend certainly demonstrate our continued confidence in the Macau market and GEG's future performance, as well as our commitment to return capital to shareholders. We're already halfway through Q3. Let me give you some colors on the outlook. Indeed, we continue to see encouraging business performance. Quarter to date, the continued recovery has been verified by the performance during summer holidays. Group wise, our mass gaming revenue has fully recovered to 2019's level, driven by Galaxy Macau's performance.
Daily drop and win were greatly higher than Q2 and tracking around 120% of 2019's level. Post the trial opening of Raffles at Galaxy Macau and the new Horizon Premium Club open, we have seen a meaningful improvement in Q3. August, month to date, we have seen further market share gains. Our hotels are effectively fully booked for the busy summer period. In September, we will add even more hotel rooms capacity with the opening of Andaz Macau. We have also run a number of very successful events and concerts at the GICC and Galaxy Arena. We have signed a number of multi-year agreements with well-established entertainment companies who will help to support our event programming. We continue to work at managing our cost structure. Staff costs represent around 80% of our OpEx.
At the end of Q2, we have 18,000 staff, which was approximately 82% of 2019's level. We are on track to deliver headcount savings, even with the resort expansion after the full opening of Phase 3. As you can see, we remain highly confident about the future of Macau as we continue to invest literally billions of dollars into our business. In fact, we invest approximately $3.3 billion during the first half this year. Our Cotai development activities, along with our existing property initiatives, also demonstrated our support of Macau by continuing to invest in the economy, creating jobs and supporting local SMEs, as well as a long-term commitment to help Macau achieve its vision of becoming a world center of tourism and leisure. We are recruiting and training additional staff in preparation for the opening of Andaz Macau next month.
We're now fully focused on the development of Cotai Phase 4, which is already well underway. Phase 4 will include six high-end hotel brands, new to Macau, together with a 4,000 seat theater, extensive F&B, retail, and non-gaming amenities. On completion, our total Macau hotel room capacity will be around 7,500 rooms and suites. We believe that with the many additional facilities that we have added and will continue to add in the future, will position us strongly for the longer-term growth. Additionally, we're in the process of opening our first overseas business development office in Tokyo, to be followed up by offices in Bangkok and Seoul, in order for us to tap into international tourist market and opportunities.
Last but not least, on the balance sheet, cash and liquid investments were HKD 24.4 billion at the end of June, and we are in a net cash position of HKD 22 billion. That concludes my prepared remarks. Operator, please begin the Q&A session.
Thank you, sir. Ladies and gentlemen, we will now begin our question-and-answer session. If you have a question for today's speakers, please press star one on your telephone keypad, and you will enter the queue. After you are announced, please ask your question. If you find that your question has been answered before it is your turn to speak, please press star two to cancel the question. Once again, please press star one on your telephone keypad to ask a question. I will now take our first question from DS Kim, from JP Morgan. Please go ahead.
Hi, good afternoon. Hi, Ted, Roland, and Peter. Thanks for taking my questions. First, can I double-check, earlier you mentioned about 120% of 2019 level quarter- to- date. Were you referring to mass drop or mass win? I missed that part. Then I have a few follow-ups.
Hi, DS. Thank you. That refers to both win and drop.
Oh! Wow, that's very nice.
Yeah, you know, on a consolidated basis.
Oh, wow. Consolidated meaning even including, StarWorld, Broadway, and everything, 120%. That's pretty impressive.
a group wide basis
Group wide, okay.
StarWorld still ran up to somewhere around 80% in Q3 versus 67% in Q2. still a very decent improvement in Q3.
Thank you, congrats on impressive performance. I actually have a few housekeeping questions, especially on OpEx, operating expense momentum this quarter. I think, if I'm not mistaken, Galaxy Macau OpEx went up about 20-something% quarter-over-quarter, and now running at about 90% of pre-COVID. My two quick question here is, A, does this increase in Q2, you know, have anything to do with Raffles soft opening so far? You know, everything Phase 3 related, both Raffles and potentially Andaz, are parked 100% at pre-opening. Just wanting to, wanted to try to understand the delta here in Q2 specifically. B, how shall we think about the run rate from here into three and fourth quarter when, you know, Phase 3 would be more released, especially Andaz?
Is it gonna be like, you know, 5% increase in OpEx, or is it gonna be more like 10%-15% meaningful bump, from the current run rate?
Sure, DS. I think your number, 20% QoQ, is actually inclusive of on, on the group level as well. If we just look at property level, the OpEx actually increased by 9%. The increase in other costs really related to some of the PR and marketing costs in Q2. Related to the OpEx increase, that's partly because of the hiring in Q2, that we are fully capacities opened in Q2, so that will be some increase in, in staff costs. In terms of the run rate and the OpEx, we're currently somewhere around 80%-85% of 2019's level.
As you noticed in my remarks, opening remarks, we are going to open Andaz and the other costs, so the pre-opening costs will become operating costs going forward. We're still quite positive in terms of the headcount saving, as opposed to 2019. As you know, the rent cost as well as the other costs will increase. Net-net, I think we are still on the confident level of managing, somewhere below 2019's OpEx level. I hope that answers your question.
It, it did. Thank you so much, sir, for the insight and details. If, if I may check finally, if that's okay, final follow-up is, can you kindly explain a bit about what happened to retail income? I, I think it's very solid, 30%-40% higher than pre-COVID level, but just, some of the investors wanted to get a little more details. Sequentially, it seems to be declining about 10% at GGR. Was there any one-off or non-recurring component, either last quarter or this quarter? Just wanted to double-check, and I'll, I'll go back into the queue. Thank you so much.
. You know, perhaps some of you may know that our contract with the tenants are more tight on a monthly basis, in terms of basis, that translate into sales, versus the other operator, perhaps are looking on more a longer-term translation into rent, into the rent income. So I believe our number really reflects what's happening in the market more accurately, in terms of the sales volume. Our Q2 quarters drop around 10%, really, is resulted from a really outperforming Q1 result, as a result of a couple of very, very large purchases in the jewelries and high-end products in the mall, which is quite good, and when it in Q1.
Back in Q3, I see the number is actually normalized to a very decent level, compared to Q2 as well, at the moment. Thank you very much.
Thank you. We'll now move to our next question from Angus Chan from UBS. Please go ahead. Angus, please go ahead. Your line is open.
I can hear you.
We can barely hear you. Could you please adjust your mouth, please?
Hi, can you hear me?
Yes, please go ahead.
Oh, sorry. Hey, thanks for taking my question. You mentioned about 120% mass win and drop. Can we expect your EBITDA to be back to 2019 and above in August? That's the first question. Secondly, on the mass hold rates, it seems like there's a lower mass hold this year versus last year and also versus 2019. Is there anything that you can point to to explain that lower mass hold situation? Thirdly, the timing of Phase 4. What's the latest thinking of completion and opening? Thank you.
Sure, Angus. I, I think with an improvement in terms of drop of win, EBITDA definitely improve. We are looking at a decent level. We are not checking whether that will be over 2019 level. We are thinking about very positive way, moving forward. In terms of the whole percentage, I think we are still in the range of acceptable level, if you may, in terms of Galaxy Macau. In StarWorld, we see some improvement actually in Q3 as well, moving forward to higher numbers. That may attribute to some of the behavior of customers in the market.
I do see some improvement also in Q3 when you look at the length of stay of customer, the stay and the device on the customer, as well as the average bet is actually moving on to a more favorable position in Q3. In terms of the opening of we're trying very hard. We are looking at get this, this quarter to top up all the tower that we have in Phase 4. The original plan was actually in 2027 opening. Given the markets are quite promising, we hope that we can actually push forward a bit, but we're trying very hard to do so.
Great. Thank you very much, then. I'll jump back in the queue. Thanks again.
Thank you. As a reminder to ask a question, please signal by pressing star one. Our next question comes from Simon Cheung from Goldman Sachs. Please go ahead.
Hi, can you hear me?
Yes, Simon.
Oh, okay, great. Hi, Ted. Hi, everyone. I, I also have a couple questions. Just the first one, we have seen, Japan, Korea opening up, the group tour visa, and that's the traffic to other countries seemingly has starting to pick up. Obviously, the market has well concerned about the diversions, potential into these other markets. We understand, Macau has changed, in terms of how they, how, what type of a customer that they have accepted. Perhaps you can, you know, share with us, your thought, on, on that front. That's that's the first questions. The second questions, re- in relation to, actually are more on the grind mass.
We can see how strongly your property perform, you know, back to 100%, actually even better than some of the other so-called premium mass-centric properties. I think, you know, one of the missing, missing part that we've been waiting for has been grind mass. Can you share with us, you know, how, what you're observing on the grind mass? Basically, haven't seen, you know, the, the summer season, we have seen very strong head count. You know, on the GGR translation, how do you see that? Then the last thing, I think you, you touched on the data as well, just on Starworld.
I remember last quarter you mentioned that you wanted to drive, the profitability. We also seen other pop-up operator like MGM. I think we've also done some renovation work over there in Peninsula. How are you thinking about Peninsula in the longer run, and what sort of things are you doing on the StarWorld? Thank you.
Great, Simon. Let's go to the travel. I, I understand there's some concern in terms of competition of cost customer from other countries in Asia after the visa opening for the traveling. As much as I can, but I do not really see anything happen impacting in Macao at this very moment. We see very strong visitation numbers, particularly in summertime. Also, we also look at our booking page currently in, in, in the summer period, fully booked, and stepping into September, also very high, very strong. Unfortunately, I don't have any insight in terms of, you know, changes, but it looks like the impact in Macao is really minimum at this stage. In terms of grind mass, you're absolutely right.
The GGR was actually positively impact by premium mass and driven by premium mass at these two quarters. Our, our base mass and our premium mass already, in terms of unique customers basis, in terms of this number, is already up to almost 100% of the 2019 level. grind mass currently was about 63% of the pre-pandemic number. If you look at this number, it's quite correlated with the inbound visitations of around 60%-70%. We are seeing some improvement, but, basically, it's roughly quite correlated with the inbound visitation number at the moment. Peninsula. I always believe that Peninsula is quite different in for as a product and also customer behavior, to Macau.
I think StarWorld is quite lucky in sitting in that position close to the cluster of the gaming areas and next to our very prominent neighbors. You see the performance from Q1 to Q2, even though with property GGR improved from around 30%, the EBITDA actually increased almost like seven, over, over 70%. And our EBITDA margins actually increased from high teens to 25% in Q2. The only direction I can see StarWorld is only north, not south. With the somebody initiative we put together, we believe that the property will be building up going forward. This is a very good example of operating leverage and full flow in StarWorld.
I, I, Simon, I hope that I responds to all your questions.
That's, that's very clear. Can I just double check with you on that grind mass number that you gave, 63%? Were you referring to the second quarter number? Because obviously, visitation, I think, in the last month or so actually, have been hovering more like 80%, 90%. Are you seeing that, you know, the grind mass also back to 80%, 90%, for example, in the recent weeks?
No, I, I am referring to inbound visitations, overall, 67%, and we see our grind mass number is also reflecting similar to that number, 60%-70%. In fact, accurately, by the end of Q2, it's actually 63%.
I understand. Okay. Thanks a lot. Thanks. Bye.
Thank you, Simon.
Thank you. There are currently no more questions in the queue.
Thank you, everyone, and see you next time.
This is the end of the GS, GEG conference call. Thank you for joining us today. You may now disconnect.