Highlights

• Galaxy’s 2Q26 results are in line but the increased dividend payout came as a positive surprise. Looking ahead, we see further room for dividend improvement.
   

• Management noted that volumes rebounded quickly after the World Cup semi-finals, particularly in the VIP and premium segments, with momentum extending into early-August.
   

• Phase 4 remains on schedule for completion by end-27, with HK$5b-6b of project spending planned for 2026. At StarWorld, the gaming floor refurbishment has been completed, and full room completion is expected by 1Q27. Maintain BUY; cut target price by 2% to HK$47.00.
   

Analysis

• 2Q26 results in line. In 2Q26, Galaxy Entertainment Group (Galaxy) achieved a net revenue of HK$11,835m (-2% yoy, -5% qoq,). Adjusted EBITDA was HK$3,380m (-5% yoy, -5% qoq). Galaxy played slightly unlucky in 2Q26, which decreased its adjusted EBITDA by HK$21m. Thus, normalised adjusted EBITDA came in at HK$3,401m (+8% yoy, -5% qoq), and normalised EBITDA margin was 28.7% (+2.5ppt yoy, -0.1ppt qoq).
   
   

• Gross gaming revenue (GGR) was HK$12,043m in 2Q26 (flat yoy, -5% qoq), outperforming the industry’s 7% qoq decline, and recovering to 79% of 2019’s level (vs recovery rate of 83% in 1Q26). Of this, VIP/mass/slot GGR changed-30%/-1%/+19% qoq, representing 22%/130%/154% of 2019’s level, respectively. We estimate that Galaxy’s GGR market share increased 0.4ppt qoq to 20.3% in 2Q26.
   

• Interim payout raised to 75%. The company declared an interim dividend of HK$0.90 per share, raising the payout ratio to 75% (vs 64% in 2H25). Looking ahead, management emphasised that dividend decisions will depend on market conditions and the company’s performance. However, they noted that owners’ interests are aligned with those of shareholders, which, in our view, suggests further room for dividend improvement.
   

• Swift post-World Cup recovery. Management sees no structural concerns regarding a continued World Cup impact, noting that volumes rebounded quickly after the semi-finals, particularly in the VIP and premium segments, with momentum extending into early-August. On competition, management observed greater rationality emerging in the market, while Galaxy's 2Q26 reinvestment was flat to slightly down yoy.
   

• Phase 4 construction on schedule. Management noted that Phase 4 is on schedule for completion by end-27, with HK$5b-6b of project spending planned for 2026. At StarWorld, the renovation impacted EBITDA by HK$14m, but the company recovered HK$8m by relocating some high-value customers to Galaxy Macau. The gaming floor refurbishment has been completed and the focus has shifted to rooms, with around 40% of the room inventory currently out of service and full completion expected by 1Q27.