The adjusted property EBITDA for GEG Entertainment's standardized win rate in the third quarter of 2021 fell 48.0% month-on-month to HK$550 million, lower than our previous expectations. Net revenue of GEG Entertainment declined 23.0% month-on-month (up 176.3% year over year) to HK$4,282 million, 4.0% higher than our expectations. Gross gaming revenue fell 26.9% month-on-month, in line with Macau's total gaming revenue falling 26.1% month-on-month in the same quarter. GEG's next major development project, Galaxy Raffles Hotel Macau, plans to open in 2022 in line with market conditions. The third and fourth phases of development projects in Cotai are ongoing.

We lowered our adjusted property EBITDA forecasts for 2021-2023 by 15.8%, 8.7%, and 4.8%, respectively. We forecast adjusted property EBITDA of HK$4.30 billion, HK$6.21 billion and HK$7.86 billion for 2021-2023, respectively. Despite the recent easing of some travel restrictions in Macau, we anticipate that as China continues to implement a zero-tolerance policy for COVID-19, repeated vaccination measures will continue until 2022.

We lowered the target price of GEG Entertainment from HK$41.00 to HK$40.00, and downgraded the investment rating from “neutral” to “sell.” We believe that Macau's cross-border travel restrictions and special vaccination measures may continue in the foreseeable future. As a result, we expect that there will be no strong reversal in the gaming industry in the future; on the contrary, revenue growth in the Macau gaming industry will be weak. Our new target price is equivalent to 39.2 times and 25.5 times the adjusted EV/EBITDA of the 2021 and 2022 property EV/EBITDA, and there is an 18.6% discount on our valuation of HK$49.13 per share using the discounted cash flow method.