Galaxy Entertainment Group Ltd

HKEX:27

Earnings Call Transcript 2020-Q4

[Operator]

Thank you for holding, and welcome to the Galaxy Entertainment Group's management update for the fourth quarter and annual results of 2020. Joining us today are: Mr. Michael Mecca, GEG Board's Nonexecutive Director; Mr. Robert Drake, Group CFO; Mr. Roland To, Senior Director of Strategic Planning; and Mr. Peter Caveny, Assistant Senior Vice President of Investor Relations. [Operator Instructions]

I would now like to pass to Mr. Drake for a presentation. Mr. Drake, please go ahead. Thank you.

[Robert Drake, executive]

Thank you, operator, and greetings, everyone, and thank you for joining us for the update on GEG's Q4 2020 results. The GEG team joining me here on today's call include: Mike Mecca, a member of the GEG Board of Directors; Roland To, Senior Director of Strategic Planning; and Peter Caveny, Assistant Senior Vice President of Investor Relations. Copies of our media release, stock exchange announcement and PowerPoint presentation are available on our website, which also include our customary disclaimers.

On behalf of our Chairman, Dr. Lui, Francis Lui, and the entire GEG family, we greatly appreciate everyone's contributions across the board, including their personal and professional sacrifices in battling the pandemic as well as our heartfelt sympathies to everyone who has been impacted by this crisis.

2021 brings much needed hope that life will indeed return more and more to normal. We will continue to navigate through this crisis together, where we are confident that we will emerge stronger and with a brighter future. We are very encouraged by the fact that Macau has entered initial stages of the gradual, sustainable and managed recovery. Having said that, we are not out of the woods yet and remain hypersensitive about future COVID-19 outbreaks and the corresponding impact on the economy.

We would like to share with you why we continue to be optimistic about the recovery of Macau as well as its longer-term future. First and foremost, the Macau government continues to effectively handle the COVID-19 crisis, where they have simply done an outstanding job over the past year. As we have said many times before, the Macau government has demonstrated proactive and decisive leadership while simultaneously generating critical community support, which is a huge accomplishment. They remain clearly focused on public health and safety as well as economic and social stability.

In fact, you may be interested in knowing that this past Monday, Macau launched its COVID-19 vaccination program and has not experienced a new locally transmitted case for over 10 months since April 9, 2020, and 0 fatalities. Further, the identification of recent imported cases prior to clearing pandemic protocols proves that their detection system is extraordinarily effective. This is simply a remarkable achievement, especially when you consider that they gradually began to reopen the market in Q3 2020 and experienced a healthy increase in visitation throughout the fourth quarter.

Macau is also supporting the prudent policy of limiting travel during the critical winter period, including Chinese New Year, which was well-signaled, totally expected and no surprise. We are pleased to report that their successful efforts have certainly yielded positive results in Q4 due to the progressive reinstatement of the critical IVS visa program through late September 2020. This contributed to a gradual increase in visitation and revenue in Q3 with the positive momentum carried into Q4.

We are also encouraged by the rebounding Chinese economy and the recent consumer trends over the October Golden Week and Christmas holidays, which signaled healthy demand. We are definitely not taking the recent trends for granted and remain as committed as ever to the health and safety of the community, our team members and guests as well as the economic and social stability of Macau, where the continued containment of the virus remains the highest priority.

Let's move on to our Q4 2020 performance, where our effective cost control efforts introduced throughout 2020 continued to yield results in a very low but gradually improving revenue environment while at the same time, we continue to make progress with our enhancement projects at our existing properties as well as our game-changing Phase 3 and Phase 4 development projects in Cotai.

GEG's Q4 2020 EBITDA improved from a $900 million loss in Q3 2020 to a positive $1 billion in Q4 for a positive $1.9 billion sequential swing. We should note that our Q4 results benefited from $100 million COVID-19 insurance claim, which was partially offset by an unlucky factor of approximately $60 million for a net impact of a positive $40 million.

We continue to work hard at effectively managing our cost structure. To that end, our Macau OpEx run rate has declined by over 30% from approximately USD 3.4 million per day under normal operating conditions to the USD 2.3 million range in Q4 2020. Even as this has ramped up in Q4, we were able to maintain the same OpEx burn rate as Q3, which indicates that we are well on the road to delivering sustainable cost savings.

We'd like to pause here, like we did back in November 2020, and make a very important point on fiscal management, especially during challenging times. We certainly acknowledge that OpEx burn rate is an important part of the expense equation. But there's certainly more to the overall cost picture than that. Daily cash burn is more indicative of the cost structure as it includes interest expense.

We are very fortunate that we are the only concessionaire in Macau that generates net interest income, not interest expense. In fact, our net interest income in Q4 was USD 300,000 per day. If you deducted $300,000 per day of interest income from the $2.3 million per day in OpEx burn, you get approximately $2 million per day in cash burn. It's a powerful example of how conservative balance sheet management really pays in challenging periods in general, and in our case, significantly differentiates us from the competition.

We would like to thank everyone on the GEG team as well as our valued suppliers, who continue to support the company in these difficult times by contributing to our cost management programs. We are proud to report that virtually all team members made voluntary contributions during this challenging period, including the Board of Directors, which waived their directors' fees; management, who participated in our nonpaid leave program; and the many team members who joined our Flexi Family Care Program. We have also contributed millions of dollars to the COVID-19 relief efforts to support the community as we previously reported.

Let's move on to our development update, where we continue to make progress with our initiatives, particularly in our home base of Macau. We will do our best to meet our opening timelines which under the circumstances may be impacted. We will provide updates on our target schedules as we move forward. We're also using this period as an opportunity to perform additional maintenance and enhancement to our existing properties. Our Cotai development activities, along with our existing property initiatives, also demonstrate our support of Macau during the pandemic by continuing to invest billions of dollars into the economy, providing jobs and supporting local SMEs as well as our long-term commitment to help Macau achieve its vision of becoming a world center of tourism and leisure.

We also continue to pursue our project intentions, where we're also expanding our focus beyond Hengqin and Macau to potentially include opportunities within the rapidly expanding Greater Bay Area, and finally, Japan, where we continue to pursue opportunities with our partner, SBM of Monaco. We're also monitoring the impact of the pandemic in Japan, which has also caused highly publicized delays to their IR process. And we'll continue to update as the situation moves forward.

Next up is an update on our balance sheet, which continues to remain strong, liquid and virtually unlevered. Cash and liquid investments increased from $43.2 billion at the end of September 2020 to $46 billion at December 31, 2020. Our net cash position declined from $39.7 billion to $36.8 billion as we continued to invest in our development projects, including Cotai Phases 3 and 4. Total debt increased from $3.5 billion to $9.2 billion, which primarily reflects $8.7 billion of borrowings associated with our treasury yield enhancement initiative. Our core non-arbitrage borrowings remained virtually unchanged at $500 million, which includes 0 debt associated with our Macau operations.

Moving on to our outlook. We remain very optimistic that Macau's gradual, sustainable and managed recovery will continue. As we just mentioned, we are in the midst of the critical winter period. If we continue to remain diligent in effectively containing COVID-19 outbreaks and execute vaccination programs, then we're very confident that our little sprouts will grow into green shoots as spring approaches, when the next key indicator is the May holiday. We are also encouraged by the rebounding Chinese economy and are quite confident that the leisure and tourism sector will continue to recover on the back of the overall economy.

In the interim, we are well capitalized with sufficient liquidity to ride out the storm, fund operations and invest in our development initiatives in general and our game-changing Cotai Phases 3 and 4 specifically. We also remain upbeat and very positive about the long-term prospects for Macau and the Greater Bay Area, where the underlying fundamentals continue to remain incredibly compelling.

And finally, we like to extend our sincere appreciation to the Macau government for their outstanding performance as well as the community, which has rallied under their leadership during the pandemic. We would also like to thank all the GEG team members again, who have been extraordinarily supportive of the community and the company during this challenging period. We continue to stand strong together.

And with that, we have concluded our opening remarks. So operator, let's open up the lines for questions.

[Operator]

[Operator Instructions] We will now take our first question from Praveen Choudhary from Morgan Stanley.

[Praveen Choudhary, analyst]

I have just one question, although it might have more parts. First of all, congratulations, your stock prices are breaking new grounds, obviously because of all the hard work that you guys have been doing so well then. Question is about the new developments. Could you spend a little bit of time on Phase 3A timing? Also, I think there was a media article suggesting 3B, 3C MICE could be delayed to 2022.

And then the third is Phase 4, where you have obviously announced $12 billion of investment -- sorry, contract with China Construction. I just want to understand how should we think about the total CapEx versus the contract that you have given? And last question is you mentioned Greater Bay Area. Can you explain a little bit about what do you mean by that? Is it non-gaming investment? And would there be a return threshold when you go to non-gaming investments in Greater Bay Area?

[Robert Drake, executive]

Thanks for the questions, Praveen. We'll just take them in sequential order. As far as Phase 3 is concerned, again we're very excited about Phase 3A, which is the new tower at Galaxy Macau, as well as Phase 3C, which is the Galaxy International Convention Center, including our 16,000-seat arena. Our target remains the second half of 2021. So we're very excited about offering a new hospitality experience here in Macau that we believe redefines and sets a new level when it comes to this type of experience. As far as the Galaxy International Convention Center is concerned, our target remains again the second half of the year, probably towards the end of the year. But that's a flexible business. So we'll see how the MICE business rebounds over time. But we'll be ready when the MICE business is ready. So we're still pretty excited about Phase 3.

Now moving on to Phase 4, as you rightly pointed out, we did execute a contract or execute an LOI for the main contract for Phase 4 over the weekend. So we're again very excited about Phase 4. The total combined investment for Phase 3 and 4 has been -- is around [ $50 billion ], as we said for a very long period of time. And as far as CapEx is concerned, we've invested about maybe $13 billion so far of that "$50 billion". Moving forward, I'd say we'd probably do $8 billion to $9 billion a year for the next couple of years and -- as we finish out Phase 4, so -- and give you more updates as we move forward beyond '20, that would be '21 and '22 and into '23. The target opening for Phase 4 would be in the next couple of years. As you know, in the contract, we do provide some timing information in there as well.

Now as far as the Greater Bay Area is concerned, of course, we're continuing to pursue our projects in Hengqin Island and, of course, our home base in Macau. And given that the connectivity is really improving and the rapid development across the board, we're just in initial stages of exploring several different opportunities to expand our footprint. It's a little premature for us to go into a little more detail than that. We do understand what the ROI concerns are and as is our Board. So again, we're not chasing growth as far as what we are developing a longer-term plan. We are currently focused on Phases 3 and 4, which will keep us occupied. But at the same time, we do, of course, pursue our longer-term development initiatives, both not only in the Greater Bay Area but certainly offshore in areas like Japan. So we have a lot of irons in the fire and it's keeping us pretty busy. But overall, our optimism about Macau in the near term is pretty robust. And longer term, we're very confident about the long-term prospects of Macau.

[Praveen Choudhary, analyst]

And then I know you've answered almost of the questions. Can I just add one more question about the recent trends?

[Robert Drake, executive]

Sure.

[Praveen Choudhary, analyst]

We saw some GGR data on a weekly basis improving significantly. We don't know that's luck-driven or otherwise. But a question for you is that, are you still hoping for premium mass to drive the recovery? Second, are you getting any more insight in terms of how the recovery process or the visa process helps in the next few months in terms of again border opening, et cetera, with China and Hong Kong, please? That's it for me.

[Robert Drake, executive]

Sure. Thanks, Praveen. As you see, with the reinstatement of the IVS back in the third quarter of the year, we saw progressive improvement in visitation across the board throughout the balance of 2020. As you saw, we had a great Q4. On a relative basis, it was the market's best pandemic performance, if you will. And we're certainly riding that. And that positive momentum actually has carried into 2021 so far, notwithstanding that the government policy is really trying to limit visitation during this critical winter period as we continue to deal with the pandemic. Of course, the focus is always health and public safety -- public health and safety, excuse me.

So -- but what we've seen over Chinese New Year, notwithstanding the visitation trends, is that, believe it or not, our mass business actually grew year-on-year and the -- and actually grew relative to our performance in October Golden Week. And the -- so that's really encouraging. And we continue to believe, and the numbers are verifying that out, is that it will be a premium mass-led recovery. The more encouraging sign that we've seen recently that is expanding into all segments of the market, including [ what you wanted ], the middle market and, of course, the core segments as well. So again, we're very excited about the mass business and its long-term prospects. I would also note that we actually had our 2 best days in the pandemic period during Chinese New Year in terms of mass volume and mass win.

VIP, our expectations are somewhat more muted there. But at the same time, even VIP had its 2 best days in this pandemic period during Chinese New Year, so notwithstanding all the visitation limits that were imposed on the market. So on the back of that, our retail business actually had a very strong period as well. So that's telling that it's -- again in our retail, it's the premium segment that's leading the recovery, if it's premium, like -- whether it's jewelries and watches, premium fashion and the like, so -- and we actually saw that during the fourth quarter, where in December, believe it or not, same-store sales -- tenant sales were up almost upwards of 10% year-on-year.

So again, that signals that there's pent-up demand. And then what we're trying to do from a development perspective has positioned us to capture the premium mass segment, which was what Phase 3A is really designed to do. And it's just not a hotel tower, we'll be offering a complement of other experiences to really hopefully attract a fair amount of premium mass business. Of course, that carries into our Phase 4 development initiatives as well. And we look forward to sharing more details about that in the near future. I think I caught all your questions.

[Praveen Choudhary, analyst]

Yes, you did.

[Robert Drake, executive]

I'm sorry. On IVS, again what you're seeing is some gradual positive news coming out and optimism, especially in the share prices recently, about the recovery. And now that the quarantines are somewhat limited and China has really got its handle on the overall pandemic in implementing its vaccination programs, there's -- we hope that they'll continue to make the IVS process a little smoother and easier to get into Macau. But it's all about again public health and safety and containing the virus. And the next key indicator for us if we continue on this -- on this trend will be the May holiday.

[Operator]

[Operator Instructions] We now move to our next question from Ronald Leung from Bank of America.

[Ronald Leung, analyst]

Congratulations on the very solid results. So my first question actually something to Japan. And I would like to see what Mike has in mind. And would you mind to give us some updates on the Japan project? There are a lot of moving parts. And what's the latest update there?

[Michael Mecca, executive]

Thanks for the question, [ Billy ]. The Japan, like all countries, has experienced an impact on both business and personal life as a result of the pandemic. Japan has accordingly adjusted their programs and timelines. The national government has announced an extension of the submission dates for prefectures and their casino consortium partners from October 2021 to April 2022. Officially, 4 prefectures have announced RFPs. These include, of course, Osaka, Yokohama, Nagasaki and Wakayama.

Given that submissions to the national government have been extended until April 2022, there is still a period of time before any announcement from the national government would be expected. GEG with SBM of Monaco and our local partners remain very interested in bringing our brand of IR to Japan. And we are continuing to explore all the options. We'll keep you posted as the process progresses.

[Ronald Leung, analyst]

And then my second question, just a follow-up on what Praveen -- related to the more recent current trend in Macau. As Bob mentioned, Chinese New Year has turned out to be somewhat decent. And -- but after Chinese New Year, I'm just wondering because we saw that in Mainland, a number of cases coming -- local cases coming down to 0. Have you seen that make a difference and whether you have seen a pickup of the traffic or interest in the booking, all these? If you have any anecdote, story that you can share, that would be appreciated.

[Robert Drake, executive]

No. I think with the recent trends in the containment of the pandemic, were they effective in the very near future, that basically any Mainland Chinese are not required to go through a quarantine to get into Macau is certainly a positive signal. And then of course, on the back of that, they're rolling out the vaccination programs. And even Macau launched theirs this past Monday. And I believe Hong Kong is happening in the very near future as well. So I think as we're moving forward here, we can see some light at the end of the tunnel. We certainly acknowledge that we're not out of the woods yet and have to remain very diligent. But it is cause for optimism.

So as we move through the critical winter period into spring, we hope that the trends continue. And it's really going to be a gradual, managed and sustainable recovery. Again, we just want to do it the right way. And it's all about the long term. And I think Galaxy is well positioned to continue on our trajectory here with our Phases 3 and 4. And I'm very excited about the longer-term future and acknowledge that we have to be very vigilant during the near term.

[Ronald Leung, analyst]

And my final question, just related to housekeeping numbers. Just wondering for 4Q, are there any one-off or loss impact that we should pay attention to? And also, one number stand out quite a bit. As Bob mentioned, retail has been very strong. And in fact, like I saw the number, it's almost back to 2019 levels. My question for the retail is like can we just basically assume that will be the case for the rest of 2021, meaning it's fully recovered now, so I thought maybe even we can think of some growth from there, too?

[Robert Drake, executive]

First, thanks for the questions, [ Billy ]. First, on the luck factor and other items in Q4, we actually played it unlucky, if you will. And that cost us specifically, I think, $59 million in EBITDA, so -- which was offset by $100 million claim from our insurance proceeds, so it's the -- so the net was a positive $40 million. So moving -- as far as retail is concerned, we think it's a great indicator that there is indeed demand in Mainland China and that the economy continues to recover. You can all see the retail numbers in Mainland China, and particularly the premium segments, so -- and that has actually cascaded its way to Macau. We were very fortunate in even during the fourth quarter and December specifically that we had definitely same-store sales growth year-on-year for -- from our mall operations. It was almost 10%.

So we hope that continues. And I just think, as I was saying earlier, that it's a positive signal. Because of that, it certainly helps our breakeven get down into the low 20s as a percentage of normal operating revenue, if you will. So we're encouraged about the trend. And again, we just have to remain vigilant through this critical winter period. And hopefully, continued containment of the pandemic and the vaccination programs will yield some positive results hopefully in the near future and with the next key indicator being the May holiday.

[Operator]

[Operator Instructions] We now go to our next question from George Choi from Citi.

[Shui Lung Choi, analyst]

I just want to get a sense on the business trends during the CNY holidays. How would you describe the players during that period? Are they players who spend more time than usual at your property? Or are they players coming in with a deeper pocket?

[Robert Drake, executive]

Well, it's a great question. If you -- why don't we start with the geographic distribution? We saw -- because of the travel restrictions Guangdong did -- was the driver of visitation. Of course, we like non-Guangdong, which we did get some, but not as much, given the policy constraints. And of course, we like the non-Guangdong customers to visit because they stay longer and spend more. What we did see as far as our customers are concerned, George, it's a great question, is that they actually -- the people who came actually played up. So like we have a target customer, say, they have a target ADT of a certain amount. They actually paid above their theoretical.

So that was a positive signal for us. Again, we're seeing just these positive signals of latent demand, whether it's in the gaming segment of the business, the retail segment and certainly in our hotel business as well. So it's the -- as you can see that we offer a variety of hotel experiences here. Galaxy Macau, the Ritz-Carlton and the Banyan Tree occupancy during the peak period was virtually full, so it's -- we're encouraged by those trends. But again, we're just focused on navigating through the crisis. We're very supportive of all the government policies. We understand it's a marathon and not a sprint. And we remain very supportive of the government and their policies. And we're very excited about our long-term prospects in Macau in general and for Galaxy specifically.

[Shui Lung Choi, analyst]

And if I can have a follow-up question, since you mentioned vaccination has been started in Macau, do you have a rough estimate on how many of your firm-wide staff in both gaming areas and the non-gaming areas have already taken a shot in the arm?

[Robert Drake, executive]

I'm sorry, George. Can you say that once more?

[Shui Lung Choi, analyst]

I'm just wondering how many of your staff in your properties have already taken the vaccine.

[Robert Drake, executive]

Well, we're managing through that. It's the -- we have a locals-first policy here at Galaxy as do many of the concessionaires, if not all. So we're a long way from hitting our capacity constraints, given that although we have trimmed our workforce at the top end, the local workforce remains totally intact. So we're managing through that, and we're very pleased with the contributions across the board and particularly to locals, including some of our Flexi Family Care Programs and nonpaid leave programs. But as far as adjusting our staffing from our team members' perspective, as business comes back, we have a lot of latitude here. So it's -- we have a ways to run before we start incurring incremental labor expense.

[Peter J. Caveny, executive]

It's Peter here. I think it was a bit of a bad line. George was asking a little bit about the vaccine rollout program, I'm sorry.

[Shui Lung Choi, analyst]

In Macau.

[Robert Drake, executive]

I'm sorry, I didn't -- I guess I misheard it. In fact, I did. So it's the -- we just started rolling out the program. I think -- the Macau government did. So it started on Monday. I think I read in the paper they're almost at the 10,000 inoculation level. So it's -- we're very supportive of those programs. And then of course, we have NAT testing centers here at -- both at Galaxy and at StarWorld. So we're here to make it as smooth a process as we can. And I'm sure the government will report on how many people are participating in the program. You got one for free, George. I helped you on your staffing question.

[Operator]

We will now move to our next question from Simon Cheung from Goldman Sachs.

[Simon Cheung, analyst]

Okay. So I think I have three questions. One is very simple. OpEx, obviously, you've done very well. Can you give us a sense what was your daily OpEx today and your guidance? I remember last time you said that unless GEG gone back to half of your previous -- pre-COVID-19 level, you can maintain at this sort of level. I wanted to get a sense whether that has changed in your mind.

[Robert Drake, executive]

As far as OpEx is concerned, we've been focusing on managing our entire cost structure throughout the pandemic. And in Q3, we reported it was $2.3 million. And based on -- even though business ramped up in Q4, we were actually able to keep it at USD 2.3 million per day, which shows that we're converting some of these temporary savings into permanent savings. And as business ramps up over time, we expect that number to increase modestly. Hopefully, it increases a lot. That means the business has really returned.

And more from a conservative fiscal management standpoint, because of the way we've controlled our cost structure and the way our -- particularly in how our retail business has bounced back, that our breakeven point for revenue these days is about 20% of normal operating. So usually, we started in the high 20s and then 30s and brought into the mid- to high 20s and now it's into the low 20s, if not 20%. But again, as I was alluding to with George's question is that, given our staffing levels, that we have a fair amount of run rate for revenue to pick up before we had to incur additional operating expenses in general, so which translates into very solid operating leverage.

So our goal here is to deliver 1, 2 -- a couple of points in margin in a normal operating environment here. So it's -- I think everyone is trying to position -- learned a lot about their operations. Macau has traditionally been focused on more on the top line. We've really taken a hard look at our cost structure and with the goal of really delivering sustainable savings over time. So I'm sure quite confident that, at least for Galaxy, we'll emerge a much stronger and more efficient operator as the market rebounds, which translates into margin lift and hopefully more EBITDA.

[Simon Cheung, analyst]

That's great. But maybe, can I ask you, in the longer run, let's say, when I'm going back to the '19 level, what sort of daily run rate OpEx that we're talking about? Are we going to be going back $3 million, $3.5 million? Are we going to be settling at about $2.7 million, $2.8 million?

[Robert Drake, executive]

Well, it's -- we'll certainly move -- inch up there. And if the OpEx is inching up, Simon, that's actually a good sign. Because it is a very high variable cost business, right? So it's -- hopefully, it doesn't -- in the pre-pandemic world, it was USD 3.4 million a day. Hopefully, it comes in a little better than that.

[Simon Cheung, analyst]

Understood. Okay. And then second question is on the VIP, all this concern about bringing overseas gambler by junkets now becoming a criminal offense. Obviously, for you guys, it doesn't really matter a lot, the big driver is coming from mass market. I wanted to get a sense what is your take in terms of Macau's role or positioning, given all these change in the policy. And to what extent do you think you can capture it through whether premium mass and VIP?

[Robert Drake, executive]

Sure. As we all know, VIPs play a very important role in the evolution of Macau. Everyone in the pandemic has experienced some challenges. And that would, of course, now include the concessionaires but every segment of the business, including VIP. And we've signaled this all along, and the governments have actually followed through with this, the regulatory environment continues to tighten. And you're right to point out that the security laws will have an impact on the way people conduct business. So where we see the VIP business is emerging basically into 2 models. One is more an onshore model, where they're trying to position themselves within Macau, and some are going offshore and diversifying their businesses.

So it's -- it will be interesting to see how the VIP business evolves. But it's definitely moving. And as you would expect, with the development of Cotai and integrated resorts that -- and helping Macau achieve its goals and objectives of becoming a global tourism destination that we continue to see the mass business as the driver of growth. And in particular, it will be a battleground for the premium mass customer, where actually the customers are the winner because we offer such innovative and state-of-the-art product.

[Simon Cheung, analyst]

Understood. And then my last question is on Phase 4. I understand you progressed well on Phase 3. But on Phase 4, can you remind us what exactly have you done so far? And again, can you remind us your -- any revision on the plan about room count and all those?

[Robert Drake, executive]

Well, we'd be delighted to show you if we were here, Simon. So we actually have made a lot of progress with the development of Phase 4. Certainly, the piling has been complete. We're starting on the foundation work, if you will. As we noted over the weekend and commented on the call that we executed an LOI for the main construction contract. So that's a big milestone for us. We're moving forward with that. And with the development timeline, open up in the next -- it will be definitely after the concession 2 to 3 years down the road. So we're definitely focused more on Phase 3 now. But of course, we're running in parallel with Phase 4. And we'd be delighted to show you our construction and progress when you visit here.

[Simon Cheung, analyst]

Understood. Yes. Congrats on a good set of results.

[Operator]

[Operator Instructions] We will now take our next question from D. S. Kim from JPMorgan.

[D. S. Kim, analyst]

Congrats on the solid results. And I actually have a few main points. One, did we write back bonus accrual during the fourth quarter, like some of our peers? I didn't hear you say that from the one-off. And then $100 million insurance claim that you mentioned, was it booked for both properties above EBITDA or netted against corporate expenses?

[Robert Drake, executive]

As far as the bonus -- thanks for the questions, D.S. As far as the bonus accruals are concerned, we didn't change them in Q3 or Q4. So there was no write-back of the bonus accrual. As far as the insurance claim is concerned, it is part of the EBITDA and a majority of that went to Galaxy Macau, I'd say, about 3/4, and then the other 1/4 went to StarWorld.

[D. S. Kim, analyst]

And secondly, about the expansion, I just noticed from our press release that we are now saying -- we're at 3,000 rooms for Phase 3 and 4 combined versus, I think, last quarter, it was 3,500 and a few quarters before originally 4,000-plus. Could you elaborate a bit on where this change came from between Phase 3 and 4 and some more color on this reduction?

[Robert Drake, executive]

You passed the test. You actually saw that we actually made some changes there. But as we've been saying all along in the future direction of Macau that the premium mass segment is certainly going to be one of the main drivers. And we're positioning our product to really pursue that segment of the market. As far as hotel rooms are concerned, it's not about quantity, it's about quality. And you can see this in our offerings here with particularly in the near term with our Phase 3A. So we're really focused on delivering a differentiated experience relative to the market when it comes to our hospitality.

We look forward to sharing more information about our Phase 4 as we move forward in the development process. But again, we're focused on quality, not quantity of rooms. So there's been some valuable lessons applied from some of the developments here in Macau that we're applying to our development strategy. And we're quite confident that we could not only build it but execute and generate incremental EBITDA and shareholder value.

[D. S. Kim, analyst]

And my last question is also regarding Phase 4. Because when I read the LOI, it says China Construction has to complete the work by January 2024, if I'm not mistaken. Does that mean that we'll only start the fit-out after this handover? Or we can work simultaneously and then can open on this date or even before this handover? And that's it for me.

[Robert Drake, executive]

A very fair comment there. Our goal is to certainly run in parallel. So it's the -- at different stages of the process, you switch over to doing some of the other trades and their roles and handing it over to ops for preopening exercises and the like there. It's a great catch. We did say that I think it's 1,053 days in the contract. And we also have incentives for them if they deliver ahead of schedule that we can move a little faster. But no, you're right to point that out. And we're again very excited about what Phase 4 will do for the market. It will be the only next-generation IR in Macau, period, end of sentence.

[Operator]

[Operator Instructions] There are currently no more questions.

[Robert Drake, executive]

Well, thank you, operator, and thanks, everyone, for joining us on today's call. Please stay safe and be healthy. And we look forward to updating you on our Q1 results sometime during the month of May. Thank you very much for your time.

[Operator]

This is the end of GEG's conference call. Thank you for joining us today. You may now disconnect.