4Q23 performance slightly fell short of the market's agreed expectations
Aobo Holdings announced 4Q23 results on March 6: the company's net revenue reached HK$6.394 billion, up 320% year on year, up 9% month on month, and recovered to 75% of 4Q19 level. The Company's adjusted EBITDA was HK$700 million, a year-on-year correction, up 24% month-on-month, and recovered to 59% of the 4Q19 level, slightly lower than Bloomberg's agreed forecast of HK$725 million.
We believe that the company's lower-than-expected performance was mainly due to the loss of market share in the company's own promotion of casinos, and at the same time, the growth of EBITDA in Shanghai was slower than expected.
Development trends
Minutes of the company's management performance conference call:
Following the completion of the company's internal restructuring, Aobo created a unified operating platform to promote synergy between the two properties of Shanghai Lisboa and Grand Lisboa through customer mutual promotion programs, such as introducing Grand Lisboa customers to stay in Shanghai Lisboa hotel rooms.
The initial success of the company's unified operating platform is mainly reflected in the fact that from the beginning of the year to February, midfield gaming revenue (excluding satellite casinos) has recovered to 135% of the same period in 2019 (compared to 4Q23 midfield returns to 115% in 4Q19), while the number of VIP transcoders increased 25% compared to the 4Q23 level.
The Company expects the Company's capital expenditure in 2024 to be approximately HK$1.5 billion;? Management targets that the company's overall market share is expected to reach 12-14% by 2025, and the market share in Lisboa is expected to reach 5-6%;
On 4Q23, the EBITDA reached break-even and achieved a profit of HK$2 million. The company's management expects to continue to climb in 2024.
Profit forecasting and valuation
We have kept the company's 2024 and 2025 EBITDA forecasts largely unchanged. The company's current share price corresponds to 9 times 2024 EV/EBITDA. We maintain a “neutral” rating and target price of HK$3.10. The target price is 10 times the 2024 EV/EBITDA, with 36% upside compared to the current stock price.
risks
Lisboa's volume falls short of expectations; recovery may be slower than expected; competition in the industry intensifies, and market share may be lost.