The current situation of the company
Thanks to the high level of full vaccination rate (86% as of June 18, 2022) and the effective control measures of the Cambodian government, there have been no new cases of COVID-19 in Cambodia since May 18, 2022 to June 28, 2022. Then, in the recent sporadic repeated outbreaks, the daily increase was controlled at about single digits, proving that the epidemic in Cambodia was basically under control. We expect that the improvement of the epidemic will actively promote the operation of Jinjie's holding gaming business.
On April 21, 2022, on the basis of lifting all entry restrictions for fully vaccinated passengers, the Cambodian government further adjusted the entry and isolation restrictions for passengers, reducing the quarantine period for passengers who had not been fully vaccinated from 14 days to 7 days. Since the end of 2021, in order to promote the rapid resumption of tourism, Southeast Asian countries have relaxed travel restrictions one after another. At present, Singapore, Malaysia, Vietnam and Thailand have fully opened their borders to fully vaccinated tourists. Driven by the relaxation of travel restrictions in Southeast Asian countries and the growth in the number of international flights, the number of tourists to Cambodia has continued to increase since the end of 2021. In April and May 2022, the total number of visitors to Cambodia from the Asia-Pacific region (except China) increased by 539% and 1067% respectively compared with the same period last year. We expect that in view of the further relaxation of travel restrictions in Southeast Asian countries, visitors from Southeast Asian countries will continue to dominate the tourism recovery in Cambodia and support the recovery of the gaming business in the gold industry.
At present, although the total number of seats on Chinese flights to Cambodia has increased due to travel restrictions, it is still at a low level. The total number of seats on 2Q22 flights from China to Cambodia recorded 17815, a decline of 97% compared with 2Q19 before the epidemic, and there is still plenty of room for recovery. We believe that most of the company's VIP gambling business is driven by Chinese tourists to Cambodia, so the intermediary VIP business is not as expected, and we still need to wait for the resumption of Sino-Cambodian tourism.
Comment
Taking into account the gradual relaxation of travel restrictions, we expect 2Q22 revenue to reach $140 million, a substantial increase over the same period last year (up 6934% year-on-year; 25% month-on-month growth); we expect 2Q22 EBITDA to be $75 million, an increase of 24% month-on-month, from a loss of 2Q21 to a regular employee.
Profit forecast and valuation
We lowered our 2022 revenue and EBITDA forecasts by 41% and 8% to $603 million and $335 million, and lowered 2023 revenue and EBITDA forecasts by 35% and 3% to $793 million and $460 million, mainly due to: 1) the recovery of the number of visitors was lower than expected; 2) the recovery of intermediary VIP business was lower than expected; and 3) the midfield business was driven by an increase in the share of midfield revenue, resulting in higher profit margins. We maintain an outperform industry rating and target price of HK $8.80, corresponding to 11x 2023e EV/EBITDA. The current share price corresponds to 11.7 x 2022e EV/EBITDA and 8.1x 2023e EV/EBITDA;. Our target price has 38.1% 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.