1H21's performance fell short of our expectations.
Gold World Holdings released operating data for the first half of 2021: total revenue of $130.4 million fell 659 per cent year-on-year and 85 per cent against 1H19), including total revenue of $129.3 million (down 65 per cent year-on-year and 85 per cent against 1H19) and non-gaming revenue of $1.1 million (down 80 per cent year-on-year and 94 per cent compared with 1H19). EBITDA reached $11.2 million (down 87% year-on-year and 97% compared with 1H19). The company's results fell short of our expectations because the casino business has been suspended since the local outbreak in Phnom Penh in early March this year, and despite only operating results in the first two months, it still recorded an EBITDA net profit. Highlights of the interim performance call: 1) considering that the number of confirmed cases of COVID-19 has begun to decline and the vaccination rate in Phnom Penh is high, the company's management expects to resume operation in the short term; 2) thanks to the reduction in staff costs, the company successfully reduced the average daily operating cost to $210000 at 2Q21 (down 25% from the previous month) 3) the new betting tax will be introduced from January 1, 2021 (VIP betting and midfield betting tax rates are 4% and 7%, respectively); 4) despite the disturbance of the epidemic, the construction of Naga 3 (Phase III project) has not been interrupted.
Gold World Holdings currently 1) consumes approximately $210000 in cash per day (compared to $280000 for 1Q21); 2) the company expects 2H21 capital and maintenance expenses to be $6000-I billion; and 3) annualized interest expenses are approximately $37 million. The company still has cash and other liquidity available as of the first half of the year, which means the company can operate for nearly 24 months with close to zero income.
Profit forecast and valuation
Considering that the casinos affected by the epidemic have been closed since March this year, we have lowered our 2021 earnings and EBITDA forecasts by 71% and 85% to $392 million and $76.33 million, and by 13% and 17% to $1.305 billion and $472 million in 2022 earnings and EBITDA forecasts. We maintain our win-win industry rating, lowering our target price by 18.3% to HK $9.80, corresponding to 12 times 2022 EV/EBITDA, which is 56.8% upside from the current share price. The current share price corresponds to 8 times 2022 EVEBITDA.
Risk.
The uncertainty of the construction of Naga3 project; the uncertainty of the new betting tax rate in Cambodia; the expectation of Naga2 volume slow.