The current situation of the company
The gold betting business resumed on September 15, 2021, ending a suspension of operations for more than six months due to a local outbreak on March 2, 2021. Since the resumption of operation, Jinjie Casino has stepped up its existing epidemic prevention measures, including requiring all entry personnel to be fully vaccinated, on-site rapid antigen testing (effective for 7 days) and contact tracking. We believe that the resumption of operations at the end of the third quarter and stricter epidemic prevention measures will continue to accelerate the recovery of gold gambling business in 2022.
Since November 15, 2021, the Cambodian government has announced the cancellation of the 14-day quarantine policy for visitors who have been fully vaccinated. This is mainly due to the effective control of the recent epidemic (the daily number of new cases is about double digits) and the popularity of vaccination (as of January 18, 2022, the complete vaccination rate is about 81%). Other Southeast Asian countries have also gradually opened their borders to vaccinated tourists since the end of last year, including Thailand, Malaysia and Vietnam.
At the same time, the recovery of visitors to Cambodia in 2021 was mainly driven by Southeast Asian countries. In the second half of 2021, the total number of flights from Southeast Asia and China to Cambodia decreased by 58% compared with the same period last year (down 97% compared with 2019), mainly due to the decline in the number of seats going to Cambodia caused by the recurrence of the epidemic in China (down 84% from the same period last year; 98% compared with 2019), but fortunately, growth from Southeast Asian countries contributed (5% year-on-year growth; 96% lower than 2019). The total number of visitors to Cambodia also showed the above recovery trend. We believe that until the number of Chinese visitors recovers, visitors from Southeast Asia will continue to provide impetus for the recovery of the gaming business in the gold industry.
Comment
Considering the resumption of gaming operations on September 15, 2021, we expect 4Q21 revenue to reach $126 million, a significant increase from the previous year (down 52 per cent from a year earlier; up 843 per cent from a year earlier); we expect 4Q21 EBITDA to be $29.12 million (down 70 per cent from a year earlier), from 2Q21's losses.
Valuation and suggestion
We lowered our 2021 revenue and EBITDA forecasts by 32% and 85%, and lowered 2022 revenue and EBITDA forecasts by 21% and 23%, mainly due to: 1) 3Q21 resumed operation for only 15 days, and 2) the recovery was lower than expected due to the recent outbreak. We introduce 2023 revenue and EBITDA forecasts of $1.22 billion and $471 million (- 14% and-23% compared with market consensus expectations). We maintained our outperform industry rating, lowering our target price by 10.2% to HK $8.80, corresponding to 11x 2023eEV/EBITDA. The current share price corresponds to 11.8x 2022e EV/EBITDA and 9.0x 2023eEVUniverse EBITDA; our target price has 30.4% upside over the current share price.
Risk
The uncertainty of Naga3 project construction; the uncertainty of epidemic recurrence; the amount of Naga2 is slower than expected.