4Q23 results fell slightly short of the market's unanimous expectations
According to the parent company Sands Group's announcement on January 24, Sands China announced 4Q23 results: net revenue of US$1,863 million, recovering to 83% of 4Q19 (up 320% year on year, up 4% month on month), adjusted property EBITDA of US$654 million, recovering to 81% of 4Q19, up 4% month-on-month, slightly below Bloomberg's agreed expectations of US$689 million.
We attribute Sands China's performance to: 1) strong recovery in midfield gaming revenue from The Venetian, Londoners, and Four Seasons (returning to 102%, 109%, and 139% respectively in 4Q19); 2) the continued strong performance of the non-gaming sector, with retail revenue returning to 96% in 4Q19, up 17% quarter-on-quarter; 3) being dragged down by poor VIP win rates.
Development trends
Highlights of the management performance meeting are as follows:
1) The company believes that the strong performance of the gaming industry in Macau, China in December 2023 fully reflects the demand for the 2024 Spring Festival holiday;
2) High-end midfielders continued to drive recovery (recovering to 101% in 4Q19, up 13% from quarter to quarter), and continued to outperform average midfielders (recovering to 93% in 4Q19, up 7% from quarter to quarter). Management expects regular midfielders to continue to grow, driven by transportation infrastructure restoration and non-gaming and entertainment projects;
3) The Londoner Phase 2 (Sheraton Hotel) renovation project started in 4Q23. The management expects the project to be completed in 1Q25. The company expects the disruption of the gaming business to reach a high point in 2H24, and 1H24 will be relatively unaffected;
4) The company believes that the reopening of long-haul flights departing from mainland China may affect the number of visitors to Macau, China.
Profit forecasting and valuation
We maintain our adjusted EBITDA forecasts for 2024 and 2025. The current share price corresponds to 9 times 2024 EV/EBITDA. We maintain our outperforming industry rating and target price of HK$34.00, which corresponds to 13 times the 2024 EV/EBITDA, with 58% upside compared to the current stock price.
risks
The recovery is likely to be slower than expected; market share may be lost due to increased competition in the industry.