Maintain the forecast for growth in gaming revenue. According to the management guidelines of Huicai Holdings, Jinbi Huicai Casino is expected to achieve unit growth in 2015, and Huadu Casino will achieve double-digit growth. However, based on our cautious view of the betting market as a whole, we think this revenue growth guide is slightly optimistic, particularly in the first half of 2015. As a result, we maintain our previous forecast for the company's gaming revenue, which was HK$2.1 billion in 2015, up 1.7% year over year. Comparing the overall growth rate of Macau's mid-market revenue - 6%, the company's growth rate is still faster than the market, mainly because the company's target customer base is less affected by the weak high-end market. We expect that in 2015, both Jinbihuicai and Huaxin will record the same gaming revenue as in 2014, with Portuguese Casino growing 20% year over year, while Jockey Club Casino will see a sharp increase of nearly 200% year over year.
Huadu has reversed its losses. Since gaming revenue grew by only 1.7%, we think the profit growth in the company's gaming management business this year will come mainly from falling costs. According to our forecasts, Huadu Casino's EBITDA profit margin in 2014 was close to -10%, and Jockey Club Casino also recorded large losses. According to company management, year-to-date cost control measures have begun to bear fruit. Huadu Casino has achieved break-even at the EBITDA level. As Huadu and Jockey Club Casino continue to increase revenue month-on-month while further saving on food and guest room costs, it is expected that the two casinos will contribute positively to EBITDA this year.
The machine order situation was better than expected. According to management guidelines, the company will install 1,500 machines in Macau this year and 1,000 machines overseas. Up to now, more than half of the orders are in hand. However, considering that machines usually require a trial period of 2 to 3 months after installation before they are officially included in sales, and that there are various uncertainties that may delay the installation of the company's machines, our sales forecast for the machinery business is more conservative than the company's guidelines. We expect the company to sell a total of 1,550 machines this year, an increase of 200 units over our previous forecast, which is mainly reflected in more machine sales in Macau. However, sales of most of the 1550 units are expected to be completed in the second half of the year.
Maintain the increase in holdings rating. We raised EPS in 2015, 2016, and 2017 from HK$0.12, HK$0.20, and HK$0.31 to HK$0.17, HK$0.26, and HK$0.39, respectively. On the one hand, it reflects better cost control and more machine sales; on the other hand, because the company has received tax support from the government, profits from gambling will be exempt from income tax in the future, thereby reducing annual tax expenses by about 30 million Hong Kong dollars. Based on the adjustment of profit forecasts, we raised the target price to HK$2.47, corresponding to an increase of 11%. Maintain the increase in holdings rating.
Catalyst: The company is a constituent stock of the Hang Seng Small Market Capitalization Index. News about the Shenzhen-Hong Kong Stock Connect will be a catalyst for the company's stock price to rise. Furthermore, the announcement of new orders and government grants of gambling tables will also be catalytic factors for stock prices.