After more than 5 months of listing, the stock price of Macau Palace (02536), which has been on a high, is about to face the "unlocking challenge".

Futu Finance APP noted that the first six-month lock-up period after the landing of the "number one European gambling stock" Macau Palace on the Hong Kong stock market will end on September 25th. According to the company's previous final offering price and distribution announcement, at that time, both the initial public offering investors and cornerstone investors of the company will be unlocked, with a combined unlocking amount accounting for over 12% of the company's total issued share capital.

For recent IPOs, unlocking typically serves as a test of stock price pressure. After all, a series of important shareholders from angel rounds to participating in international allocations before listing will evaluate whether to exit after unlocking. Especially for symbols whose stock prices have been rising steadily after listing, the selling pressure generated by unlocking is significant.

Taking Macau Palace as an example, although the company's first annual report disclosed after listing was disappointing, with Macau Palace's net income shrinking by 80% to 9.492 million Hong Kong dollars in the 2024 fiscal year amid a slight increase in revenue, the stock price of the company still maintains a strong running trend overall. In the first half of the year, Macau Palace's stock price once soared to 7.19 Hong Kong dollars. Although the stock experienced a sharp pullback in early August, the current price still remains relatively high at 4.25 Hong Kong dollars, with an increase of over 60% compared to the issue price of 2.6 Hong Kong dollars.

A massive unlocking will soon test the stock price.

As a company that combines gambling and leisure, Galaxy Paradise was spun off from Far East Consortium International (00035), with operations covering the gambling business in the Czech Republic and hotel business in Germany and Austria. According to public information, after the completion of the listing, Far East Consortium holds 73.21% of Galaxy Paradise through Ample Bonus; Dateplum Harvest Limited, an initial public offering investor, holds 8.93%. In addition, Galaxy Paradise also introduced a cornerstone investor UP International Technology Limited, a provider of slot machines and social games in Taiwan, which subscribed for HK$70 million in shares, accounting for 3.4% of the total share capital after the IPO.

As mentioned in the first section, after listing on the Hong Kong stock market, Galaxy Paradise's stock price trend can be described as strong, even reaching HK$7.19 at one point two months after listing, an increase of about 1.8 times from the issue price. Considering the twists and turns in the Hong Kong stock market this year, aside from the influence of active capital speculation, the rising trend of Galaxy Paradise's stock price may be associated with the company's own scarcity.

It is understood that the vast majority of gambling stocks in the Hong Kong stock market currently focus on Macau or Southeast Asia. Galaxy Paradise is the only comprehensive European gambling and entertainment company whose equity is held and controlled by a Hong Kong listed company. This undoubtedly helps attract attention from the local market funds in Hong Kong. Moreover, Galaxy Paradise has obtained an online gambling license issued by the Malta Gaming Authority, which can also be considered a bonus for the company's stock enthusiasts.

However, it is worth noting that Galaxy Paradise's stock price showed a downturn after peaking in late May, even dropping by 30% in just one week at the beginning of last month, interrupting the upward trend of the stock price.

Fast forward to mid-September, now there are only over ten days left until the important shareholders of Galaxy Paradise are unlocked. With a large amount of chips 'unleashed', the huge unrealized gains of the major shareholders may turn into selling pressure on the market at any time.

According to the distribution announcement released by Galaxy Paradise, the 8.93% stake held by the initial public offering investor Dateplum Harvest Limited and the 3.4% stake held by the cornerstone investor UP International Technology Limited will be unlocked at the end of this month. At that time, if these two shareholders choose to 'take profit', it will undoubtedly have a significant impact on the stock price. After all, in terms of liquidity, the average daily turnover of Galaxy Paradise has been around HK$1 million so far in September, with only September 10th having a turnover of over HK$2 million in a single day, and the total turnover that day was only HK$5.5857 million. It is not easy to absorb large concentrated selling pressure with such liquidity.

In addition, the lock-up period for the controlling shareholder of Galaxy Paradise holding over 70% of the shares is set to expire on September 25th and March 25, 2025. This also means that the first batch of restricted shares held by the major shareholder can be traded on the market as early as September 26th.

With the imminent lifting of the ban on a large amount of restricted shares, the next period may be a test of the true colors of the Grand Lisboa Palace.

Sudden increase in profit pressure raises doubts about growth prospects.

For listed companies, performance is the best touchstone to evaluate the investment value of a company.

Although Grand Lisboa Palace is a rare European gambling stock in the Hong Kong stock market, it is regrettable that the company's current performance is unlikely to attract value investors focusing on fundamental values.

In the 2024 fiscal year, Grand Lisboa Palace's revenue increased by 7% to 0.564 billion Hong Kong dollars, while net income shrank by nearly 80% to 9.492 million Hong Kong dollars. The significant decline in profit is related to the erosion of profits by the expenses incurred in the run-up to the listing. Data shows that the expenses incurred by Grand Lisboa Palace for listing in fiscal year 24 amounted to 23.537 million Hong Kong dollars. However, even after excluding these expenses, the company's net income still showed a negative growth compared to the same period last year.

In terms of revenue breakdown, Grand Lisboa Palace's revenue comes from gambling business and hotel business. Among them, the gambling business mainly comes from casinos in the Czech Republic, contributing revenue of 0.402 billion Hong Kong dollars during the period, with a growth rate of only 3%.

The lackluster growth of the gambling business is not surprising, in fact, even in Europe, the competition among entertainment venue operators is equally intense. According to the data from Insights Consultancy, as of the end of 2022, there are 472 physical entertainment venues and 362 gambling halls in the Czech Republic. In 2022, based on the total number of slot machines in the Czech Republic, the market share of the top three entertainment venue operators is 35.4%, with The Grand Lisboa ranked ninth among entertainment venue operators, accounting for only 2.5% market share; and based on total gambling revenue, Grand Lisboa's market share in the physical slot machine industry in the Czech Republic is 5.3%.

Looking at the hotel business again, in the 24 fiscal year, Grand Lisboa's revenue from this business was 0.162 billion Hong Kong dollars, a 17% year-on-year increase. It is reported that this is due to the increase in hotel occupancy rates and daily average income.

Furthermore, it is worth mentioning that even though Grand Lisboa's entertainment venues are located in the Czech Republic, over 95% of the players visiting the company's entertainment venues come from surrounding countries such as Austria and Germany, with only a very small portion of revenue coming from local Czech residents. In other words, the company's financial prospects are closely related to the overall economic, social, and market conditions in Austria and Germany. Although in recent years Grand Lisboa has been actively cultivating new growth points, such as obtaining an online gambling business license in Malta, whether these new businesses can smoothly take over still requires further observation.

The confusing fundamental growth expectations are obviously not good news for Grand Lisboa, whose stock price has already experienced a round of speculative frenzy since going public. Now faced with a large unlocking challenge again, whether Grand Lisboa's stock price can stabilize under multiple challenges probably needs a big question mark.