Revenue fell in the first half of the year, while profits and EBITDA remained profitable. Gold World Holdings had revenue of US $378 million in the first half, a drop of 58% from the same period last year, mainly due to the fact that the Cambodian government ordered casinos across the country to close down from April 1 under the COVID-19 epidemic, resulting in almost zero revenue for the whole second quarter. The company adopted a cost-saving plan, and management costs and employee costs fell by 25% and 16% respectively. EBITDA profit margins fell from 36.8% to 23.5%. The situation in the gaming industry in the first half of the year was grim. The profits and EBITDA of Macau's six peers were all at a loss, but Golden World Holdings' profits and EBITDA were US $20.6 million and US $88.7 million respectively, which remained positive and outperformed their peers.
After the restart, revenue returned to much higher than expected. The number of foreign tourists visiting Cambodia has dropped from about 10, 000 a day in 2019 to 1000 at present. The Cambodian government has also suspended the issuance of entry visas. In the face of a substantial reduction in foreign customers, gambling revenue can still recover at a high speed. In August (from August 1 to August 26), the average daily betting turnover of midfield / slot machine / VIP business was 3.38 million / 5.12 million and 1.04 billion US dollars, respectively. It returned to 90% of the average daily betting amount in the first quarter of this year, 93% of the average daily bet, and 98% of the daily bet, reflecting a strong local domestic demand market. The total betting volume of the midfield / slot machine / VIP business in August was 57% higher than that in July (the VIP and slot machine business was restarted on July 8). Income rebounded much faster than expected.
Plenty of cash and low financial risk. By the end of the first half of the year, the company had $286 million in cash and deposits, and successfully issued a $350 million preferred note with an interest rate of 7.95% on July 7 this year, enough to repay the most recent $300m debt due in 2021. The company also announced an interim dividend of $0.29 per share, maintaining a high dividend yield of 60%.
The risk of short-term epidemic can be controlled, and the logic of long-term growth remains unchanged. In the short term, the biggest potential factor affecting the company's revenue is the epidemic. Cambodia is one of the countries in Asia where the COVID-19 epidemic is well controlled. Although there are occasional new confirmed cases, there has been no large-scale outbreak, and the risk of casinos in the gold industry closing again is not high. In the long run, Phnom Penh radiates several emerging economies in Southeast Asia, and the gaming industry will also grow synchronously. The rapid recovery of gold holding business in this epidemic reflects the strong resilience of the Cambodian gaming market.
Investment suggestion: we predict that the company's homing net profit from 2020 to 2022 will be US $2.3 EV/EBITDA 4.6 / 620 million, year-on-year change will be-54.7%, 95.4%, 33.5%, respectively. Based on the relative size of the gold sector in the Hong Kong stock gaming industry and the market environment in Cambodia, the target price will be HK $12.2. Maintain a "buy" rating.
Risk tips: the impact of the global epidemic on the tourism and gambling industry, the increased risk of competition among large casinos in Southeast Asia, the risk of postponement of the third phase of the gold project, and the risk that the time and income of the Russian project are not up to expectations.