The future star of the gaming industry in Southeast Asia enjoys the growth potential of emerging markets. According to IMF's forecast, economic growth in Southeast Asia will remain at more than 7 per cent in 2022-2027. Jinjie Entertainment City, located in Phnom Penh, the capital of Cambodia, radiates the Southeast Asian market, benefiting from the industrial upgrading, economic development and increased wealth of residents in Southeast Asia. Although the scale and market maturity of Cambodia's gaming industry is far less than that of Macao, China, it has great potential for growth in the future.
Jinjie Casino is a well-known brand in the region, and its business scale continues to expand. After its completion in 2017, Jinjie Phase 2 enhanced the company's brand image in Southeast Asia and contributed to a substantial increase in Jinjie holding revenue. The company invested 3.5 billion dollars to build Golden World Phase 3 (Naga3), which is expected to be completed in 2025, with a long-term strategic vision. The third phase of the project will consist of a 75-story skyscraper and two 52-story super high-rise buildings, which will greatly increase the number of gaming tables and comprehensive reception capacity of the company to 1300. Further enhance the influence of Jinjie casinos in Southeast Asia.
Exclusive management rights plus low tax rates, low labor costs, business advantages are highlighted. Jinjie Holdings holds a 70-year gaming license granted by the Cambodian government and is granted the exclusive right to conduct gaming business within 200 kilometers of Phnom Penh, the capital of Cambodia. Jinjie Entertainment City, the largest five-star integrated entertainment venue in Cambodia, has been operating for 27 years and has maintained steady income and performance growth before the epidemic. The gold industry can enjoy a preferential tax environment in Cambodia, lower labor costs, and is more profitable than its counterparts in Macao, China. In 2021, gambling taxes and fees in the gold industry accounted for 5.4 per cent of income, far lower than the legal 39 per cent of the gaming industry in Macau, China.
The epidemic repeatedly shows operational resilience and has strong profit flexibility after the opening of the border. Under the influence of the epidemic, Jinjie 2020swap was closed for 3 months / 6 months respectively in 2021, and its revenue in two years was 47% and 11% of 2019 revenue, respectively. In extreme cases, the adjusted EBITDA in 2021 is still positive, which is US $265 million / 22.4 million respectively. The operation has strong anti-risk ability. In 2021, the profit margin before interest, tax, amortization and depreciation is 9.9%, which is in the leading level of the industry; the adjusted net profit is-150 million US dollars, which outperforms the gaming industry in Macau, China.
Investment advice: we predict that the company's revenue in 2022-2024 will be US $60,000,000, an increase of 165.5%, a year-on-year increase of 37.4%, a year-on-year increase of 213.9%, a year-on-year increase of 69.1%, a year-on-year increase of 33.6%. Based on the smaller size of the gold industry compared to its Macau counterparts in China and the growth of the Cambodian market, we give a "buy" rating of 13 times the next 12-month EV/EBITDA, with a target price of HK $8.63, compared with the current price of HK $7.05, with a potential increase of 22%.
Risk hints: the impact of the epidemic exceeds the expected risk, the increase of large casinos in Southeast Asia aggravates the risk of competition, Cambodia's own economic and political risks, Naga3 will produce share dilution in the future.
