Core views

The company's 24Q3 net revenue was 1.77 billion US dollars, -1.0% year over year, and net profit was 0.268 billion US dollars, +16.0% year over year. Adjusted EBITDA was 0.585 billion, -7.3% YoY. The overall profit calculation for the 24Q3 gaming business was 83.2% compared to the same period in 2019, +2.2 pct. Net income and net profit both increased compared to 2019's recovery compared to 24Q2, showing stable revenue and profit under the influence of Londoners' transformation. The original Sheraton Hotel in London was transformed into Minghui and gradually opened, and the Minghui Casino opened. The overall progress of the renovation is impressive. After the release of high-quality properties, it is expected that the attractiveness of passenger flow will increase due to accelerated industry recovery and policy boosting.

occurrences

The company's 24Q3 net revenue was 1.77 billion US dollars, -1.0% year over year, and net profit was 0.268 billion US dollars, +16.0% year over year. Adjusted EBITDA was 0.585 billion, -7.3% YoY.

Brief review

Demonstrating strong revenue and profitability under the influence of transformation

The company's net revenue remained stable year-on-year in 24Q3, and net profit still achieved good growth. Under the influence of the closure of some guest rooms and casinos due to the transformation of Londoners in Q3, it still showed strong revenue and profit stability, and the company maintained a relatively steady level of market share in the Macau gaming industry. Net revenue for 24Q3 recovered to 83.9% in the same period of 2019. The recovery rate for Q1 and Q2 both increased during the year, and the recovery rate for Q2 was +2.1pct compared to the previous month. 24Q3 net profit recovered 59.0% compared to the same period in 2019, 24q2+10.9pct month-on-month. The 24Q3 adjusted EBITDA recovery rate was 77.5% compared to the same period in 2019, 24q2+4.2pct month-on-month. Considering that the impact of Londoners' transformation on supply in the second half of the year was greater than in the first half of the year, 24Q3 performed well; according to the company's overall gaming data, 24Q3 VIP business revenue recovered 43.2% compared to the same period in 2019, and rebounded rapidly from month to month, 24q2+11.2pct. Midfield business's profit recovery rate was 93.1% compared to 2019, and was -5.0 pct month-on-month, which was affected to a certain extent by Londoners casinos. 24Q3's overall gaming business profit calculation was 83.2% compared to the same period in 2019, and +2.2 pct compared to 24Q2.

By property, Venetian 24Q3 Casino's revenue recovery rate was 80.4% compared to 2019, and +0.7pct compared to 24Q2. Overall net revenue recovery was 81.3%, +1.0pct month-on-month.

Adjusted EBITDA recovery rate of 78.1%, +0.1pct month-on-month; Londoner 24Q3 casino revenue recovered 94.2% compared to 2019, +5.4pct month-on-month. Overall net revenue recovery was 94.5%, +2.6pct month-on-month. Adjusted EBITDA recovery rate of 73.4%, +11.0pct month-on-month.

Londoners are making impressive progress in renovation. The incremental recovery of the high-quality property superposition industry helped grow. The former Sheraton Hotel in London was transformed into a Marriott brand, renamed the Londoner Renault, and created 2,405 high-quality guest rooms and a new series of experience packages. The number of suites increased to about 1,500, which was a marked increase. The actual release area is impressive and gradually opened. London's Renminghui Casino has also opened, and the Cotai Arena is expected to be renovated and debuted in December. Overall, Londoners are progressing quite well. It is expected that the renovation can be completed as planned. The overall experience of the newly upgraded hotel rooms, casinos, entertainment halls and other entertainment facilities is expected to gain more traffic and market share after full opening. If dividend payments resume next year, the company is expected to once again strengthen its ability to gather high-quality customers based on logic such as Macau's leading share of midmarket and non-gaming businesses, high-quality property upgrades, a significant increase in incremental area compared to before the pandemic, and increased shareholder feedback. During the 11th National Day holiday period, the average number of inbound visitors to Macau exceeded the same period in 2019, and the average daily gaming revenue was also close to the same period in 2019, and the performance exceeded expectations. This year coincides with the 25th anniversary of Macau's return. Earlier, the Hong Kong and Macao Affairs Office of the State Council stated that more policies benefiting Hong Kong and Macao will continue to be introduced. A series of policies, such as increasing the number of free travel cities and Qin and Macau tour groups during the year, have had good effects on the recovery of visitors entering Macau and the increase in consumption during the year, and the future is worth looking forward to.

Investment advice: Net profit due to mother is expected to be achieved from 2024 to 2026:1.073 billion US dollars, 1.613 billion US dollars, and 1.882 billion US dollars. The current stock price corresponding PE is 19X, 13X, and 11X, respectively, and the corresponding EV/EBITDA is 11.5X, 7.5X, and 6.5X, respectively, maintaining an “incremental” rating.

Risk analysis

1. If the restoration of passenger traffic from the Mainland to Macau falls short of expectations at the end of the year, there may be a situation where the overall restoration of casino traffic falls short of expectations and the utilization rate of gaming tables is not high, which will affect revenue side recovery;

2. In the future, if Macau Gaming's VIP business shrinks significantly, 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. If the gaming industry shows a clear inventory trend, it may cause pressure on the revenue side;

3. Various licenses promise investment amounts for the next 10 years, mainly focusing on non-gaming and foreign customer drainage, and there is a risk that it will be difficult to obtain a good return on investment; 4. Performance disturbances caused by the renovation of Londoners and other properties and there is still uncertainty about the results verification 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.