Core views

The company's 24H1 net revenue increased 37% year-on-year to HK$21.5 billion, and adjusted EBITDA increased 37% to HK$6 billion year-on-year. Revenue for 24Q2 was HK$10.918 billion, recovering to approximately 83% of the same period in 2019. The gaming business recovered steadily, with midfield revenue recovering to about 114% in the same period in 2019, and the market share is expected to increase steadily. High-quality properties continue to be optimized and are expected to continue to release growth in the next few years, and the non-gaming business is developing rapidly. The dividend ratio increased in 2024. It is expected that the company will continue to benefit from high-quality asset conditions, the gradual restoration of inbound tourism in Macau, and the expansion of overseas markets.

occurrences

The company announced 2024 interim results. 24H1 net revenue increased 37% year-on-year to HK$21.5 billion, and adjusted EBITDA increased 37% to HK$6 billion year-on-year.

Brief review

Revenue performance and gaming business recovery increased rapidly, and the market share steadily improved to 24H1's revenue of HK$21.47 billion, or +36.6% over the same period last year. Net profit to mother was HK$4.387 billion, +51.8% YoY. Adjusted EBITDA was HK$6.011 billion, +37.2% year over year; revenue for a single 24Q2 was HK$10.918 billion, +26.1% year over year, recovering to 82.9% in the same period in 2019, with a recovery of +2.0pct compared to 24Q1. The adjusted EBITDA was HK$3.176 billion, +28.4% year over year, recovering to 73.3% in the same period in 2019, with a recovery of +2.1pct compared to 24Q1. The EBITDA margin was adjusted to 29%, +2pct; the company's gaming business recovery also achieved a steady increase. 24Q2's total gaming revenue was HK$10.34 billion, recovering to 68.0% in the same period in 2019, recovering to 68.0% in the same period in 2019, with a recovery of +5.5 pct compared to 24Q1; of these, VIP business revenue was 1.391 billion, +49.4% year over year, recovering to 19.0% over the same period in 2019, with a recovery of +1.5pct month-on-month. Midfield business revenue was 8.291 billion, +31.9% year over year, recovering to 114.1% in the same period in 2019, with a recovery rate of +8.9pct month-on-month. Slot machine revenue was 0.658 billion, +48.5% year over year, recovering to 108.4% in the same period in 2019, with a recovery rate of +9.4pct; 24Q2's non-gaming business was 1.483 billion, +17.4% year over year, recovering to 112.8% in the same period in 2019, and recovery rate of -7.3 pcts month-on-month. The midfield business showed a significant increase in growth compared to 2019, and was clearly ahead of the overall recovery of Macau Gaming. The market share is expected to continue to increase since mid-year.

The results of high-quality property construction and renovation are obvious. The mid-year dividend ratio is impressive. Galaxy Macau is still the core property that contributed the most revenue. 24Q2 revenue was HK$8.644 billion, +32.0% over the same period last year, recovering to 90.7% in the same period in 2019. Of these, VIP revenue recovered to 23.4%. Midfield earnings recovered to 141.1%, +14.7pct month-on-month. Total gaming revenue recovered to 80.5%, +5.3pct; Macau's interstellar revenue recovered to 48.0% in the same period in 2019, +2.2pct month-on-month; the EBITDA for Broadway Macau 24Q2 was HK$8 million, double that of 24Q1, and reversed losses from HK$-10 million in 23Q2. The occupancy rate of core properties remained stable month-on-month; the 24H1 construction materials business had an adjusted EBITDA of HK$0.366 billion, +11%; in terms of growth, Capella will open in mid-2025 to provide about 100 luxury sky villas and suites. Phase IV of Cotai is currently being developed, focusing on non-gaming. The company continues to promote its property upgrading projects, focusing on increasing non-gaming innovation experiences to maintain competitiveness and promote the launch of smart desks. As of the end of 24H1, holding HK$29 billion in cash and current investments, net debt of HK$25.2 billion, the balance and liability situation is still excellent, and if places such as Thailand can successfully legalize gaming in the future, it is expected that the company will continue to pay attention to relevant local development opportunities; 24H1 materials and consumables accounted for 3.3% of the cost, -1.2 pct year on year. Employee expenses accounted for 18.6%, -3.6 pct year over year. Other operating expenses accounted for 14.3%, +0.9pct year on year; the company declared an interim dividend of HK$0.5 per share, accounting for approximately 49.9% of the current earnings. The dividend ratio has increased, and it is expected that subsequent companies will continue to optimize shareholder feedback; since this year, inbound visitors to Macau have continued to recover steadily, and there have been significant improvements in entry facilitation policies, transportation and facilities, and the Macau gaming industry is expected to continue to benefit.

Investment advice: Net profit due to mother is expected to be achieved from 2024 to 2026 at HK$10.183 billion, HK$12.182 billion, and HK$13.294 billion. The PE corresponding to the current stock price is 13X, 11X, and 10X, respectively, and the corresponding EV/EBITDA are 11X, 9X, and 8X, respectively, maintaining an “incremental” rating.

Risk analysis

1. If the restoration of passenger traffic from the Mainland to Macau falls short of expectations, 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. It may put pressure on the revenue side; 3. Each license promises investment amounts 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; 5. New property construction and stock property renovation fall short of expectations, overseas development falls short of expectations, etc.