3Q23 performance is in line with the market's unanimous expectations
On November 14, Aobo Holdings announced its 3Q23 results: net income of HK$5.868 billion, up 471% year on year, up 9% month on month, and recovered to 71% of 3Q19; adjusted EBITDA was HK$566 million, which turned into profit year over year and returned to 60% of 3Q19, which is basically in line with Bloomberg's unanimous estimate of HK$567 million.
We believe that the performance of the Australian Expo is mainly due to the fact that Shanghai Lisboa Properties and satellite casinos are still losing EBITDA, but the recovery of Grand Lisboa and other self-promoted casinos continues to meet expectations.
Development trends
Key points of the management performance conference call:
In October 2023, the Group's total gaming revenue increased 27% month-on-month, and the operating efficiency in November 2023 was similar to August 2023;
In October 2023, the group's midterm betting volume (excluding Lisboa and satellite casinos) reached 105% of the same period in 2019;
Through natural losses, the cost of 3Q23 surplus employees fell from HK$169 million to HK$148 million;? Management expects that all excess employee costs will be completely absorbed by 2025 through employee redeployment and natural loss after further expansion in Lisboa.
Shanghai Lisboa Casino Business Operation:
In October 2023, Lisboa Property EBITDA achieved a break-even balance;? As of 3Q23, the total number of hotel rooms that have been put into operation is 1,723. Management expects that by 4Q23, the total number of hotel rooms put into operation is 1,892;
Management goal: Shanghai Lisboa Property will achieve a market share of 4-5% in 2025.
Profit forecasting and valuation
We lowered our EBITDA forecasts for 2023 and 2024 by 23% and 2% to HK$1,795 billion and HK$4.118 billion, as the EBITDA balance of Shanghai Properties was slower than expected. The current stock price corresponds to 10 times 2024e EV/EBITDA. We maintained a neutral rating, but lowered our target price by 16% to HK$3.10, corresponding to 10 times 2024e EV/EBITDA, with 17% room to increase from the current stock price.
risks
The pace of recovery may be slower than expected; the volume released by Shanghai Lisboa falls short of expectations; competition in the industry intensifies, and market share may be lost.