Core views
The company's 24Q1 revenue and performance maintained a steady year-on-year increase. Net earnings and adjusted EBITDA recovery were under pressure compared to 23Q4 in the same period in 2019, but the recovery of core properties such as The Venetian increased month-on-month and remained steady. The overall pressure on 24Q1 may be related to the renovation and renovation of some properties. Peak seasons such as the Spring Festival in the first quarter were also affected by passenger flow. The overall recovery of the retail business improved month-on-month and continued to improve. During the year, it is expected that the company will still benefit from a steady upward trend in the overall recovery of the industry, and the active development of the company's non-gaming business. Combined with the past two years of property renovation and ongoing renovation, the company is expected to unleash growth potential.
occurrences
The controlling shareholder of the company disclosed the company's operations and performance for the first quarter of 2024. The company achieved net revenue of US$1,800 million in 24Q1, +42% year-on-year. Achieved results of $297 million, compared to a net loss of $10 million in 23Q1. Achieved adjusted EBITDA of US$610 million, +53.3% YoY.
Brief review
Revenue performance continued to increase steadily, and Venetian's main business revenue recovery increased month-on-month, and the company's 24Q1 revenue and performance side maintained the same relatively obvious growth. Looking at core properties, Venetian's main business revenue recovery increased month-on-month compared to the same period in 2019. 24Q1 Venetian Casino's revenue recovery reached 86.2%, and +5.1 pct month-on-month in 23Q4. Room revenue recovery was 91.2%, +0.5pct month-on-month in 23Q4. Shopping center revenue recovery rate was 96.4%, +3.4pct month-on-month. Revenue recovery from major business formats increased month-on-month compared to 2019. 24Q1 Venetian's overall net earnings recovery was 86.0%, +3.6pct, adjusted EBITDA of US$314 million, recovery rate of 87.0%, +4.9pct month-on-month, EBITDA profit margin 40.7%, +0.3pct, overall improvement; Londoners' 24Q1 net earnings and adjusted EBITDA were under pressure from 2019. Net earnings of US$562 million, recovery was 97.4% month-on-month, and -19.2pct month-on-month. Adjusted EBITDA was US$172 million, recovery rate 81.1%, -24.4% month-on-month; Parisian 24Q1 net earnings and adjusted EBITDA also declined month-on-month, with net earnings recovery 50.7%, -4.7pct, adjusted EBITDA recovery 43.6%, -12.2pct month-on-month; overall retail property recovery showed a significant month-on-month increase; on the gaming data side, the 24Q1 company's VIP business profit recovered to the same period in 2019 19.3%, -4.3pct month-on-month, midfield business revenue of US$1,414 billion, recovered to 93.0% in the same period in 2019, or -3.6pct month-on-month. However, the Venetian still showed an increase in midfield business earnings compared to 2019 compared to 23Q4, and the core property remained stable. The company's overall pressure in the first quarter may be related to the renovation of the Cotai Arena and Sheraton. Beginning in early 2024, these two properties began the renovation and renovation process, which had an impact on traffic during peak seasons such as the Spring Festival.
The non-gaming business continues to gain strength, benefiting from the steady recovery of the industry
As the scarce supply in the region, Macau's gaming industry is resilient on the demand side. The number of inbound visitors during the 2024 Spring Festival, Qingming, and Easter holidays all performed well. The average number of visitors per day was close to pre-epidemic levels, verifying that demand is steady. Macau Lucky Gaming's ggr in March was 19.503 billion patacas, recovering to about 75.5% in the same period in 2019, up 2.6 pct from February. From January to January 2024, Macau Gaming ggr totaled 57.326 billion patacas, recovering to about 75.3% in the same period in 2019, up 72.0% from 23H2. The industry is expected to maintain a steady recovery trend throughout the year. The company actively promotes the development of non-gaming businesses such as concerts. With the gradual release of potential after the renovation of Londoners and other properties in the past two years, retail performance is gradually improving, and there is plenty of room for overall non-gaming development. It is expected that the company still has the potential to continue to increase in scale and profitability.
Investment advice: From 2024 to 2026, the company is expected to achieve net profit of US$1,413 billion, US$1,990 billion, and US$2,237 billion respectively. The current stock prices correspond to PE of 14X, 10X, and 9X, respectively, and the corresponding EV/EBITDA are 9X, 6X, and 5X, respectively, maintaining an “increase in holdings” 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. Performance disturbances caused by property renovation and there is still uncertainty about the verification of results after the renovation is completed; 5. If consumers believe that the gaming industry has strong optional consumption attributes and limited carrying capacity, it may affect consumption choices to a certain extent.