Is Galaxy Entertainment Group (SEHK:27) Undervalued Following Its Ant Bank Partnership?
Galaxy Entertainment Group (SEHK:27) has drawn fresh attention after partnering with Ant Bank (Macao) Limited to open the Galaxy Macau and Ant Bank Financial Services Station inside its integrated resort.
See our latest analysis for Galaxy Entertainment Group.
The partnership with Ant Bank comes as Galaxy Entertainment Group trades at HK$33.12, with a 30 day share price return of 5.21% but a year to date share price decline of 14.29%. Over the longer term, the 3 year total shareholder return is down 33.20%, which signals that recent momentum is rebuilding from a weaker base.
If this mix of tourism, gaming, and fintech has your attention, it could be a good moment to scan the market for other potential opportunities through our 105 top founder-led companies
Galaxy Entertainment Group’s fintech push has supported a recent recovery in the share price, but the longer term performance still lags. Is most of the potential now reflected in HK$33.12, or does the valuation still suggest further room for gains?
Price to earnings of 13.6x, is it justified?
On simple valuation checks, Galaxy Entertainment Group screens as good value on P/E versus the Hong Kong hospitality sector, but looks less attractive when you compare it with peers and a fair value benchmark.
The P/E multiple tells you how much investors are paying today for each unit of current earnings. For a company like Galaxy Entertainment Group, which earns most of its revenue from gaming and entertainment in Macau and has been growing earnings in recent years, the P/E is a quick way to see how the market is weighing its earnings profile and recovery story.
At 13.6x P/E, the stock trades below the Hong Kong hospitality industry average of 14.6x, which suggests a cheaper entry point than the wider sector. However, it is described as expensive versus the peer average of 12.4x and also relative to an estimated fair P/E of 12.9x. The market could eventually lean toward this level if sentiment or assumptions normalise.
Explore the SWS fair ratio for Galaxy Entertainment Group
Result: Price-to-earnings of 13.6x (ABOUT RIGHT)
However, investors also need to weigh risks such as Galaxy Entertainment Group’s year-to-date share price decline and the concentration of revenue in Macau gaming.
Find out about the key risks to this Galaxy Entertainment Group narrative.
Another view on Galaxy Entertainment Group’s value
While the 13.6x P/E suggests Galaxy Entertainment Group is roughly in line with where the market currently sits, the SWS DCF model presents a different view. At HK$33.12, the stock is described as trading 43.6% below an estimate of future cash flow value of HK$58.77. This raises the question of whether the market is underpricing that cash flow potential.
Look into how the SWS DCF model arrives at its fair value.
Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out Galaxy Entertainment Group for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover 262 high quality undervalued stocks. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.
Next Steps
Mixed messages on Galaxy Entertainment Group’s value and outlook can be hard to read. Act while the information is fresh and weigh both sides of the story with the 4 key rewards and 1 important warning sign
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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