A review of results for the fourth quarter of 2022: Aibo's gross gaming revenue increased 50.8% month-on-month to HK$1.43 billion (same as below). Total net revenue increased 48.1% month-on-month to $1.52 billion. VIP gaming revenue, midfield gaming revenue, and slot betting revenue increased 150.3%, 47.3%, and 52.1%, respectively; non-gaming revenue increased 33.0% month-on-month.
EBITDA's loss narrowed slightly to -950 million yuan; net profit loss widened to -315 billion yuan (the Group undertook a partial reevaluation and optimization of its core casino business to improve operational efficiency; this resulted in significant impairment costs of $1,255 million - including the book value of Huili Building's renovation costs and other impairment costs of about 4.7 million yuan and expenses associated with the closure of 5 third-party-owned casinos and two self-promoted entertainment venues at the end of December last year). Total daily operating expenses increased 6.6% month-on-month to 17.8 million yuan. The overall market share in the fourth quarter fell 3.4 percentage points to 14.2% month-on-month; the VIP business was 3.4% (+0.9%), and the midfield business was 17.4% (-5.3%). The group has cash on its accounts of about 8 billion yuan and total liabilities of about 31.8 billion yuan; it is believed that there will be no demand for financing this year.
The performance of “Grand Lisboa” and other casinos: Gaming revenue from “Grand Lisboa” and other proprietary, proprietary and third-party satellite casinos increased 137.6%, 48.9%, 26.0% and 34.5% month-on-month to $290 million, $350 million, $180 million, and $570 million respectively; their EBITDA was -160 million yuan, -120 million yuan, -350 million yuan and 2,000 yuan respectively. The Group currently operates 10 satellite entertainment companies and 4 satellite casinos operated by third parties.
Performance of “Shanghai Lisboa”: During the period, “Shanghai Lisboa” provided 158 mid-field gambling tables, 492 slots, 504 “Shanghai Lisboa” brand and 72 “Karl Lagerfel” brand hotel rooms (occupancy rates of the two hotels were about 37.5% and 29.7% respectively) and 17 restaurants. “Grand Lisboa” recorded revenue of 150 million yuan (betting was 69 million yuan — 26% of “Grand Lisboa”'s, non-gambling was 86 million yuan). EBITDA's loss was -2.6 billion yuan. The daily operating expenses of the project are 4.8 million yuan, which is expected to gradually increase to 6-7 million yuan and 8-9 million yuan this year and next year. The market share of “Shanghai Lisboa” is about 1%, and it is estimated that it will take 2-3% to reach the break-even point. The maximum number of mid-game slots can be increased to 250; more hotel rooms, dining and retail packages will be launched this year.
Other key points: The Group's EBITDA has now returned to a positive figure; the only thing is that “Shanghai Lisboa” is still losing money - since the project's products have not yet been fully launched (only 1/3 of the hotel rooms have been opened), it will take time for the project to climb, but there is an opportunity to start reaching break-even in the second half of this year). The recent betting revenue of comparable midfielders is believed to have recovered to 80% of the level in '19. The EBITDA rate of satellite casinos is expected to return to 3-4% in the future.
The target price is HK$4.90, maintaining the buying rating: Macau has begun to recover, and the recovery trend is strong. We believe that the Group will also benefit from the recovery of the industry. At the same time, the launch of “Shanghai Lisboa” will greatly enhance the Group's long-term growth and competitive advantage; we continue to be optimistic about the future development of the Australian Expo. Maintain the buy rating. The target price is HK$4.90, which is based on 10.3 times the EBITDA valuation of Grand Lisboa Casino, other self-promoted casinos and satellite casinos, and other businesses in 2024.
Key risks: We believe the following are some of the more important risks: 1) economic growth is worse than expected, 2) policy risks, 3) the performance of “going to Portugal and Beijing” falls short of expectations, and 4) liquidity issues.