The results for the fourth quarter of '23 were in line with expectations, and the adjusted EBITDA rate after normalization increased by 1 percentage point month-on-month to 35.9%
Overview of results for the fourth quarter of '23: Net revenue increased 323.7% year over year and 4.5% month-on-month to US$1.86 billion (recovering to 83% in 2019). The VIP business fell 30.2% month-on-month (this business recovered to 24% in the same period in '19; the number of transcoders increased by 23.5%), and the midfield business grew 9.2% month-on-month (high-end midfield grew 13.2% month-on-month, returning to 101% in the same period in '19; Volkswagen midfield grew 7.5% month-on-month to 93% in the same period in '19). In terms of retail business: gross revenue and operating profit increased 18.2% and 17.8%, respectively, month-on-month (recovering to 98%/97% in 2019, respectively). Hotel occupancy increased to 97.2, and the average price was $197. Adjusted EBITDA increased 3.6% month-on-month to US$650 million (recovering to 81% in the same period in '19). If the net profit ratio of the VIP business is normalized, the adjusted EBITDA will be US$690 million (returning to 88% in the same period in '19); the EBITDA rate will increase by 1 percentage point to 35.9% month-on-month. Net profit for the quarter increased 24.7% month-on-month to $290 million. Fourth-quarter results were in line with expectations. The Group held approximately $1.36 billion in cash, and net liabilities were reduced to $6.81 billion.
Performance of casinos: Revenue from The Venetian Macao, The Londoner, The Parisian, Four Seasons Hotel Macau and Paragon Casino, and Sands Macao respectively recovered to 82%, 106%, 55%, 78%, and 54% in the same period in 2019; their adjusted EBITDA was $302 million, $190 million, $68 million, $71 million, and $17 million, respectively (to 82%, 98%, 56%, 70%, 43%, respectively) in the same period in 2019.
Other key points: Management remains confident about Macau's future growth. The Group will compete through products, services and content, and its scale is one of its competitive advantages. The EBITDA rate is expected to continue to rise, benefiting from increased revenue. The Londoner's budget for the second phase increased from $1 billion to $1.2 billion. The renovation/renovation project began in November of last year. It is planned to redecorate and position the Sheraton and Conrad Hotel and Pacifica Casino; new attractions, restaurants, retail and entertainment products will also be added. The completion time is expected to be during the Spring Festival in 2025.
The impact of the expected period will mainly occur in the second half of this year. After completion, the profitability of Macau Londoners is expected to reach or surpass that of The Venetian Macao. Mr. Zheng Junnuo (former Chief Operating Officer) was appointed as CEO and President, and Robert Goldstein will no longer serve as CEO, but will continue to serve as Chairman of the Board of Directors and Chairman of the Nomination Committee. On December 5, 23, the Group signed an agreement to pay up to HK$1.95 billion to purchase shares in Sands China. The agreement is expected to be reached in the first half of this year.
Maintaining the purchase rating, target price HK$28.39: Sands China's fourth quarter performance was in line with expectations; as the operator of Macau's largest integrated entertainment resort, the Group has a leading position in the midfield and non-gaming sectors.
As demand from high-end customers increases, Four Seasons and Londoners projects will be able to seize high-end midfield market share. The Londoner Phase II can further enhance the Group's competitive advantage, and we maintain full confidence in the Group's long-term development. We maintain our buy rating, and our target price is HK$28.39, which corresponds to 14 times the EV/EBITDA in 2024.
Risk factors: We believe the following are some of the more important risks: macroeconomic uncertainty, increased competition due to the completion of new interbank projects, and policy risks.