2Q24 results are in line with the market's unanimous expectations

Aobo Holdings announced its 2Q24 results on August 27: the company's net revenue reached HK$6.881 billion, up 28% year on year, down 1% month on month, and recovered to 82% of 2Q19 level. The company's adjusted EBITDA was HK$0.871 billion, up 103% year over year and 1% month-on-month, returning to 87% of 2Q19 level, in line with Bloomberg's agreed expectations of HK$0.863 billion.

We believe that the company's performance is mainly due to the increase in the market share of gaming revenue driven by the sales volume of Shanghai Lisboa Resort properties.

Development trends

Key highlights of the company's management performance call:

In July 2024, the company's total gaming revenue market share in Macau, China reached 13.5% (12.6% compared to 2Q24), of which the total market share of Shanghai Lisboa Properties reached 2.5% (compared to 2.2% market share in 2Q24).

Thanks to the implementation of Aobo's “One Platform” program, all of the company's self-promoted casinos were able to expand their market share through the expansion of sales teams and resource sharing.

Management believes that the continued expansion of products is expected to help Aobo continue to gain market share.

Profit forecasting and valuation

We have kept the company's adjusted EBITDA forecasts for 2024 and 2025 largely unchanged. The company's current share price corresponds to 8.6 times 2024 and 6.6 times 2025 EV/EBITDA. We maintained a “neutral” rating, but lowered our target price by 9% to HK$3.00 based on a decline in the industry's valuation hub. The target price corresponds to 9.5 times 2024 and 7.4 times 2025 EV/EBITDA, with 23% 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.