Event: the company disclosed its annual results for 21 years, with gross gaming revenue (GGR) of HK $17.33 billion, year-on-year + 50.5%, equivalent to 28.2% of 19-year GGR; profit attributable to shareholders was HK $1.33 billion, reversing losses; adjusted EBITDA was HK $3.54 billion; special dividend per share was HK $0.30; and net cash at the end of the period was HK $27 billion.
4Q21 performed better than expected, with a significant increase in midfield market share: 4Q21 achieved HK $1 billion in GGR39.0, + 5.8% month-on-month, and-16.0% compared with the same period last year. Among them, the VIP GGR is 710 million Hong Kong dollars, month-on-month-42.2%, year-on-year-56.7%. Due to the influence of the regulatory environment, the operation of the intermediary VIP lounge has been suspended. The GGR of midfield and slot machine is HK $3.19 billion, month-on-month + 6.4%, year-on-year + 30.0%, and the market share of midfield business is + 3.8 points to 24.6%. Taking into account the contribution of HK $200 million in one-time callback and the impact of the high profit rate, after normalization, the adjusted EBITDA is HK $818 million, + 48.7% month-on-month, and-15.6% compared with the same period last year.
High-end midfield and non-gaming business performed well during the Spring Festival holiday: during the Lunar New year, although the number of visitors was lower than expected due to travel restrictions, GGR performed steadily, driven by high-end midfield, and some intermediary VIP customers were converted to high-end midfield customers. The hotel occupancy rate is ideal, and the retail business has reached the performance of the Spring Festival in 19 years.
Galaxy Phase 3 is nearing completion and will not participate in the recent Japanese gambling auction: at present, the Galaxy Phase 3 project in Macau has been basically completed, and the first phase of the Raffles Hotel (450 suites) will be opened first depending on the recovery of the market. the second phase of the Galaxy International Convention Center and the Andas Hotel (700) will be opened depending on the recovery of the convention and exhibition industry. At the same time, the company continues to promote the Galaxy Phase IV project. In addition, considering the impact of the epidemic, the company decided not to participate in the latest round of Japanese gambling bidding.
Profit forecast and investment rating: with the easing of travel restrictions and the opening of Galaxy Phase 3 to expand capacity, we expect total revenue of HK $31.6 billion and HK $43.36 billion and EBITDA of HK $7.25 billion and HK $13.12 billion for 22-23. The current market capitalization corresponds to the EV/EBITDA of 24.3x and 13.5x in 22-23, maintaining the "recommended" rating.
Risk tips: the risk of repeated outbreaks in the mainland; the risk of tightening foreign exchange controls; and the risk of renewal of gambling licences.