By Kate O'Keeffe 

HONG KONG--Macau gambling company Galaxy Entertainment Group Ltd. said Wednesday that it recently signed a framework agreement to build a 10 billion yuan ($1.6 billion) resort on a nearby island China hopes to transform into a thriving city at the heart of the Pearl River Delta.

Unlike Galaxy's megaresorts in Macau, which has ballooned into a $45 billion gambling market, this project wouldn't have a casino. The rationale for building the resort, the first such project set to be built by one of Macau's six casino operators, is to complement Galaxy's business in the territory, differentiate it from competitors and help develop Macau into a global tourism center, the company said.

The project could also score the company political points with China, which has embarked on an ambitious plan to turn sleepy Hengqin Island, located across a narrow waterway from Macau, into a diversified hub to augment its neighbor, the world's casino capital.

In 2005, U.S. casino company Las Vegas Sands Corp. unveiled a plan to invest more than $1 billion in a new nongambling convention center, hotel, and retail complex in Hengqin, but it never materialized.

Hengqin's future was unclear until 2009 when Xi Jinping, then vice president of China, said the central government had decided to develop the island, which is three times the size of Macau and located at the crossroads of that city, Guangdong and Hong Kong. Later that year, China approved a plan to build the University of Macau's new campus, a $1.3 billion pilot project, on Hengqin.

Since then, many other projects have been announced, including a massive marine-themed resort built by Guangdong Chimelong Group Co. that opened earlier this year. Property-to-ports conglomerate Shun Tak Holdings Ltd.--run by Pansy Ho, the daughter of Macau gambling patriarch Stanley Ho--recently unveiled plans to build a Hengqin project with hotel, office and residential components.

In total, there are plans for more than 50 projects in Hengqin across seven industries including tourism, financial services, education and technology, according to a Chinese government website about the island. Hengqin has attracted more than CNY226 billion ($36.5 billion) in investment, according to the site.

Galaxy's luxury resort, which is planned to be built along Hengqin Island's waterfront on a 2.7 square kilometer piece of land, could incorporate "bungalows like the Maldives," said Deputy Chairman Francis Lui.

The casino operator also said its net profit grew 36% to 10.1 billion Hong Kong dollars (US$1.3 billion) last year, and it declared a special dividend of HK$0.7 a share. After the release of the results, which included a fourth quarter that slightly missed analyst estimates, shares of Galaxy fell 2.7% to HK$72.10 on the Hong Kong Stock Exchange.

Next year, Galaxy plans to open the second phase of its flagship property in Macau's Cotai area, nearly doubling the size of that massive casino-resort. All five of Galaxy's competitors--Las Vegas Sands, Wynn Resorts Ltd., MGM Resorts International, SJM Holdings Ltd. and Melco Crown Entertainment Ltd.--are also planning to open new casino-resorts in Cotai over the next few years.

Grant Govertsen, an analyst at Union Gaming Group, called Galaxy's development pipeline in Macau and Hengqin "second to none," reiterated his buy rating on the company and raised his price target to HK$89 from HK$67.

Amid talk of casino expansion in places such as Japan, South Korea and Taiwan, Galaxy said it is also looking for partners to build overseas, without elaborating.

Write to Kate O'Keeffe at kathryn.okeeffe@wsj.com

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