Core views
The company's revenue and performance in 23Q4 and the full year of 2023 all achieved a steady and positive recovery. The profit recovery in 23Q4 increased again month-on-month, the recovery in midfield gaming wins increased to close to before the pandemic, and the retail business performed well. In the future, it is expected that the company will continue to benefit from the cultivation and growth of high-quality business formats such as Londoners, the growth of retail and other business formats, and will continue to benefit from demand resilience and non-gaming business development brought about by the scarcity of gaming in Macau. The size of the company's gaming business, as well as the share of midfield business and non-gaming business, has a clear advantage in Macau, and is expected to continue to benefit from industry trends.
occurrences
The company's net revenue for 23Q4 was US$1,860 million, +323% YoY; net revenue for the full year of 2023 was US$6.530 billion, +307% YoY; 23Q4 net revenue of US$288 million reversed losses, and net revenue for the full year of 2023 was US$696 million, compared to -1.58 billion US dollars in 2022. Adjusted EBITDA for the full year of 2023 was $2.22 billion.
Brief review
Revenue performance maintained a steady recovery, and midfield business recovery increased the company's 23Q4 net revenue of US$1,860 million, recovering to about 83.0% in the same period in 2019. The profit side indicator net revenue of US$288 million recovered to about 56.1% in the same period in 2019. The recovery rate increased by about 5.3 pcts month-on-month compared to 23Q3, and the degree of matching between profit side and revenue recovery continued to improve. The adjusted EBITDA for 23Q4 was US$654 million, +3.6% YoY. Looking at the full-year recovery in 2023, net revenue in 2023 was US$6.530 billion, recovered to about 74.1% in 2019, and the net revenue recovered to about 34.2% in the same period of 2019. The recovery in the second half of the year on the revenue side and profit side both increased significantly compared to the first half of the year. Looking at the gaming business, the profit ratio of 23Q4 VIPs was affected to a certain extent, and the midfield business was restored to about 96.6% in the same period in 2019. It is already very close to before the epidemic, and the company's midfield business scale increased by 7.0 pcts compared to 23Q3. , benefiting from quick fixes. The 23Q4 earnings of the slot machine business recovered to about 101.47% in the same period in 2019, surpassing pre-pandemic levels. By property, Macau Londoners recovered well. 23Q4 casino revenue recovered to about 114.3% of the same period in 2019, with a month-on-month increase of nearly 11.0pct, restaurant recovery rate of 117.4%, +13.2pct month-on-month, 95.0% month-on-month, +5.5pct month-on-month, 23Q4 Londoners recovered to 116.6% in the same period in 2019, +10.2pct month-on-month, adjusted EBITDA recovery of 105.6%, +6.8pct month-on-month. The overall level of recovery of the Venetians is stable.
Londoners continue to cultivate, and retail and other business formats continue to benefit from supply and demand upgrades. The company's scale advantage in the Macau gaming industry is obvious, and the non-gaming business was also set up earlier. The Londoners in Macau still have great potential for growth after the renovation is completed. Currently, they are still in the cultivation stage. The company expects Londoners to achieve better profitability than the Venetian when they mature. The retail business continues to improve, and it is expected that there will still be room for continued growth with a good degree of recovery. The company's capital expenditure in Macau in 23Q4 was US$109 million, an increase over the previous month, and continued to promote the construction and development of the Macau business. Macau Gaming's ggr in December 2023 was MOP 18.567 billion, recovering to about 81.3% of the same period in 2019. The recovery rate improved markedly over the past few months and 11.2 pct higher than the recovery in November. Macau Gaming GGR is around MOP 183,059 billion in 2023, recovering to around 62.6% of the same period in 2019. It is expected that recovery will continue to increase markedly in 2024, and benefit from Macau's drainage related policies. Macau's non-gaming sector will also continue to develop. The company continues to benefit from the steady cultivation and release of large amounts of investment in Macau over the past few years, as well as scarce resilience on the demand side of the business.
Investment advice: Net profit due to mother is expected to be achieved in 2024-2025 of US$1,654 billion and US$2.23 billion. The current stock prices correspond to PE of 14X and 11X, respectively, and the corresponding adjusted EV/EBITDA are 9X and 7X, respectively, maintaining an “incremental” rating.
Risk analysis
1. If the recovery of passenger traffic from the mainland to Macau falls short of expectations this year, there may be a situation where the overall restoration of passenger flow falls short of expectations and the utilization rate of gaming tables is not high, which affects revenue side restoration, and the share of some rigid costs increases, putting greater pressure on performance; 2. If the Macau gaming VIP business shrinks significantly in the future, and it is difficult to provide sufficient passenger flow to make up for it, it will be more difficult to recover gross gaming revenue than before the pandemic. The new gaming law stipulates an upper limit on the number of gaming tables., then it may bring in the revenue side stress;
3. Each license promises an investment amount for the next 10 years, mainly focusing on non-gaming and foreign customer drainage. If it is difficult to obtain a good return on investment, it may cause pressure on profitability;
4. If consumers think that the gaming industry has strong optional consumption attributes and limited carrying capacity, it may affect consumer choices to a certain extent.