Galaxy Entertainment Group (HKG:27) Is Finding It Tricky To Allocate Its Capital

Simply Wall St.2023-12-15

If we're looking to avoid a business that is in decline, what are the trends that can warn us ahead of time? A business that's potentially in decline often shows two trends, a return on capital ...

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A business that's potentially in decline often shows two trends, a return on capital ...</p>\n\n<a href=\"https://simplywall.st/stocks/hk/consumer-services/hkg-27/galaxy-entertainment-group-shares/news/galaxy-entertainment-group-hkg27-is-finding-it-tricky-to-all\">Source Link</a>\n\n</div>\n","source":"simplywall_highlight","html":"<!DOCTYPE html>\n<html>\n<head>\n<meta http-equiv=\"Content-Type\" content=\"text/html; charset=utf-8\" />\n<meta name=\"viewport\" content=\"width=device-width,initial-scale=1.0,minimum-scale=1.0,maximum-scale=1.0,user-scalable=no\"/>\n<meta name=\"format-detection\" content=\"telephone=no,email=no,address=no\" />\n<title>Galaxy Entertainment Group (HKG:27) Is Finding It Tricky To Allocate Its Capital</title>\n<style type=\"text/css\">\na,abbr,acronym,address,applet,article,aside,audio,b,big,blockquote,body,canvas,caption,center,cite,code,dd,del,details,dfn,div,dl,dt,\nem,embed,fieldset,figcaption,figure,footer,form,h1,h2,h3,h4,h5,h6,header,hgroup,html,i,iframe,img,ins,kbd,label,legend,li,mark,menu,nav,\nobject,ol,output,p,pre,q,ruby,s,samp,section,small,span,strike,strong,sub,summary,sup,table,tbody,td,tfoot,th,thead,time,tr,tt,u,ul,var,video{ font:inherit;margin:0;padding:0;vertical-align:baseline;border:0 }\nbody{ font-size:16px; line-height:1.5; color:#999; background:transparent; }\n.wrapper{ overflow:hidden;word-break:break-all;padding:10px; }\nh1,h2{ font-weight:normal; line-height:1.35; margin-bottom:.6em; }\nh3,h4,h5,h6{ line-height:1.35; margin-bottom:1em; }\nh1{ font-size:24px; }\nh2{ font-size:20px; }\nh3{ font-size:18px; }\nh4{ font-size:16px; }\nh5{ font-size:14px; }\nh6{ font-size:12px; }\np,ul,ol,blockquote,dl,table{ margin:1.2em 0; }\nul,ol{ margin-left:2em; }\nul{ list-style:disc; }\nol{ list-style:decimal; }\nli,li p{ margin:10px 0;}\nimg{ max-width:100%;display:block;margin:0 auto 1em; }\nblockquote{ color:#B5B2B1; border-left:3px solid #aaa; padding:1em; }\nstrong,b{font-weight:bold;}\nem,i{font-style:italic;}\ntable{ width:100%;border-collapse:collapse;border-spacing:1px;margin:1em 0;font-size:.9em; }\nth,td{ padding:5px;text-align:left;border:1px solid #aaa; }\nth{ font-weight:bold;background:#5d5d5d; }\n.symbol-link{font-weight:bold;}\n/* header{ border-bottom:1px solid #494756; } */\n.title{ margin:0 0 8px;line-height:1.3;color:#ddd; }\n.meta {color:#5e5c6d;font-size:13px;margin:0 0 .5em; }\na{text-decoration:none; color:#2a4b87;}\n.meta .head { display: inline-block; overflow: hidden}\n.head .h-thumb { width: 30px; height: 30px; margin: 0; padding: 0; border-radius: 50%; float: left;}\n.head .h-content { margin: 0; padding: 0 0 0 9px; float: left;}\n.head .h-name {font-size: 13px; color: #eee; margin: 0;}\n.head .h-time {font-size: 11px; color: #7E829C; margin: 0;line-height: 11px;}\n.small {font-size: 12.5px; display: inline-block; transform: scale(0.9); -webkit-transform: scale(0.9); transform-origin: left; -webkit-transform-origin: left;}\n.smaller {font-size: 12.5px; display: inline-block; transform: scale(0.8); -webkit-transform: scale(0.8); transform-origin: left; -webkit-transform-origin: left;}\n.bt-text {font-size: 12px;margin: 1.5em 0 0 0}\n.bt-text p {margin: 0}\n</style>\n</head>\n<body>\n<div class=\"wrapper\">\n<header>\n<h2 class=\"title\">\nGalaxy Entertainment Group (HKG:27) Is Finding It Tricky To Allocate Its Capital\n</h2>\n\n<h4 class=\"meta\">\n\n\n2023-12-15 14:34 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://simplywall.st/stocks/hk/consumer-services/hkg-27/galaxy-entertainment-group-shares/news/galaxy-entertainment-group-hkg27-is-finding-it-tricky-to-all><strong>Simply Wall St.</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>If we're looking to avoid a business that is in decline, what are the trends that can warn us ahead of time?  A business that's potentially in decline often shows two trends, a return on capital ...</p>\n\n<a href=\"https://simplywall.st/stocks/hk/consumer-services/hkg-27/galaxy-entertainment-group-shares/news/galaxy-entertainment-group-hkg27-is-finding-it-tricky-to-all\">Source Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","isBrief":false,"type":0,"news_type":1,"symbol":"LU0307460666.USD","symbol_name":"EASTSPRING INVESTMENTS CHINA EQUITY \"A\" ACC","start_time":0,"source_url":"https://simplywall.st/stocks/hk/consumer-services/hkg-27/galaxy-entertainment-group-shares/news/galaxy-entertainment-group-hkg27-is-finding-it-tricky-to-all","article_id":"2391316651","we_media_id":null,"thumbnails":["https://images.simplywall.st/asset/industry/4211000-choice2-main-header/1585186807418"],"rights":null,"url":"https://stock-news.laohu8.com/highlight/detail?id=2391316651","pubTimestamp":1702622054,"sourceInfo":{"source_id":"simplywall_highlight","name":"Simply Wall St."},"weMediaInfo":null,"summary":"If we're looking to avoid a business that is in decline, what are the trends that can warn us ahead of time? A business...","collect":0,"end_time":0,"defaultTopTitle":"simplywall.st","property":[],"viewcount":null,"language":"en","relate_stocks":{"LU0307460666.USD":"EASTSPRING INVESTMENTS CHINA EQUITY \"A\" ACC","LU0348783233.USD":"安联东方收入型 CI A Dis美元","LU0588546209.SGD":"Eastspring Investments - China Equity Fund AS SGD","LU0348784397.USD":"ALLIANZ ORIENTAL INCOME \"A\" (USD) ACC","LU1282649067.USD":"ALLIANZ ASIAN MULTI INCOME PLUS \"AMG\" (USD) INC A","LU0384037296.USD":"ALLIANZ ASIAN MULTI INCOME PLUS \"AT\" (USD) ACC","LU0488056044.USD":"Allianz Asian Multi Income Plus Cl AM DIS USD","LU1282649810.SGD":"Allianz Asian Multi Income Plus Cl AMg DIS H2-SGD","LU2039709279.SGD":"MANULIFE GF DRAGON GROWTH \"AA\" (SGDHDG) INC","LU0287142896.SGD":"Fidelity China Focus A-SGD","LU1328615791.USD":"FULLERTON LUX FUNDS - ALL CHINA EQUITIES \"I\" (USD) ACC","LU0594300419.USD":"富达中国消费基金A","LU0326950275.SGD":"Schroder ISF China Opportunities A Acc SGD-H","BK1521":"挪威政府全球养老基金持仓","LU0417516571.SGD":"Allianz Oriental Income Cl AT Acc SGD","BK1610":"ETF&股票定投概念","00027":"银河娱乐","LU0593848301.USD":"未来资产亚洲卓越消费股票基金A","LU0173614495.USD":"富达中国焦点A","LU1880383366.USD":"东方汇理中国股票基金 A2 (C)","BK1172":"赌场与赌博","LU0650527681.SGD":"Fidelity China Consumer A-SGD","LU0140636845.USD":"施罗德大中华区股票A Acc","BK1589":"北水核心资产","LU0211977185.USD":"EASTSPRING INVESTMENTS GREATER CHINA EQUITY \"A\" ACC"},"translate_title":"银河娱乐集团（HKG：27）发现分配资本很棘手","themeId":null,"isJumpTheme":false,"ttsUrl":null,"symbols_score_info":{"00027":1},"content_text":"If we're looking to avoid a business that is in decline, what are the trends that can warn us ahead of time?  A business that's potentially in decline often shows two trends, a return on capital employed (ROCE) that's declining, and a base of capital employed that's also declining.  Trends like this ultimately mean the business is reducing its investments and also earning less on what it has invested.  On that note, looking into Galaxy Entertainment Group (HKG:27), we weren't too upbeat about how things were going.   Understanding Return On Capital Employed (ROCE)  For those that aren't sure what ROCE is, it measures the amount of pre-tax profits a company can generate from the capital employed in its business.  To calculate this metric for Galaxy Entertainment Group, this is the formula:  Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities) 0.0089 = HK$642m ÷ (HK$84b - HK$11b) (Based on the trailing twelve months to June 2023). Therefore, Galaxy Entertainment Group has an ROCE of 0.9%. In absolute terms, that's a low return and it also under-performs the Hospitality industry average of 3.8%.   See our latest analysis for Galaxy Entertainment Group SEHK:27 Return on Capital Employed December 15th 2023 Above you can see how the current ROCE for Galaxy Entertainment Group compares to its prior returns on capital, but there's only so much you can tell from the past.  If you're interested, you can view the analysts predictions in our free report on analyst forecasts for the company.  The Trend Of ROCE  In terms of Galaxy Entertainment Group's historical ROCE movements, the trend doesn't inspire confidence.  About  five years ago, returns on capital were 19%, however they're now substantially lower than that as we saw above.  And on the capital employed front, the business is utilizing roughly the same amount of capital as it was back then.  This combination can be indicative of a mature business that still has areas to deploy capital, but the returns received aren't as high due potentially to new competition or smaller margins.  If these trends continue, we wouldn't expect Galaxy Entertainment Group to turn into a multi-bagger.     On a related note, Galaxy Entertainment Group has decreased its current liabilities to 14% of total assets.   That could partly explain why the ROCE has dropped.   What's more, this can reduce some aspects of risk to the business because now the company's suppliers or short-term creditors are funding less of its operations.  Some would claim this reduces the business' efficiency at generating ROCE since it is now funding more of the operations with its own money.     The Bottom Line  In summary, it's unfortunate that Galaxy Entertainment Group is generating lower returns from the same amount of capital.      It should come as no surprise then that the stock has fallen 11% over the last  five years, so it looks like investors are recognizing these changes.    Unless there is a shift to a more positive trajectory in these metrics, we would look elsewhere.    If you'd like to know about the risks facing Galaxy Entertainment Group, we've discovered 1 warning sign that you should be aware of.    While Galaxy Entertainment Group isn't earning the highest return, check out this free list of companies that are earning high returns on equity with solid balance sheets. Valuation is complex, but we're helping make it simple.Find out whether Galaxy Entertainment Group is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.View the Free AnalysisHave feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.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.","kind":null,"is_publish_news":null,"is_publish_highlight":null,"is_publish_live":null,"is_publish_wemedia":null,"editions":null,"symbols":[],"gpt_button":1},"commentList":[],"isCommentEnd":true,"newsSizeData":{"likeSize":0,"commentSize":0,"repostSize":0,"favoriteSize":0,"likeStatus":false,"favoriteStatus":false},"APP":{"userAgent":"Mozilla/5.0 AppleWebKit/537.36 (KHTML, like Gecko; compatible; ClaudeBot/1.0; +claudebot@anthropic.com)","isDev":false,"isTTM":true,"deviceId":"web-server-community-laohu8-v3","version":"4.22.4","shortVersion":"4.22.4","platform":"web","vendor":"web","appName":"ttm","isIOS":false,"isAndroid":false,"isTiger":false,"isTHS":false,"isWeiXin":false,"isWeiXinMini":false,"isWeiBo":false,"isQQ":false,"isBaiduSwan":false,"isBaiduBox":false,"isDingTalk":false,"isToutiao":false,"isOnePlus":false,"isHuaWei":false,"isXiaomi":false,"isXiaomiWebView":false,"isOppo":false,"isVivo":false,"isSamsung":false,"isMobile":false},"href":"/m/news/2391316651"}