Golden World Holdings' 2H20 results are in line with our expectations

Golden World Holdings announced operating data for 2020: EBITDA reached US$265 million, which is basically in line with our forecast of US$261 million. Total revenue reached $879 million (down 50% year over year), including total revenue of $870 million (down 49% year over year).

The company's business recovered in 2H20:1) The casino resumed operations on July 8, 2020, and 2H20 recorded a 71% year-on-year recovery in midfield business and a 55% year-on-year recovery in asset business; 2) 4Q20 performance continued to recover: the average number of daily midfield bins and VIP transcodes increased 23% and 7% month-on-month respectively; 3) The steady recovery of midfield business was mainly supported by the steady growth of high-end midfield business; 4) Local expatriates contributed the vast majority of demand.

Development trends

Key points mentioned by Jin Jie management at the performance conference include: 1) the midfield business contributed 59% of gross profit (55% in 2019), and the gross margin improved slightly (48% from 2019 to 49% in 2020); 2) The average entertainment time of visitors was affected, but the per capita single-day revenue contribution increased from about 6,000 US dollars before the pandemic to about 10,000 US dollars, thanks to the company's development of ordinary midfield customers into high-end midfield customers, which in turn developed into direct responsibility customers; 3) Although no bad accounts were recorded, the company believes that the responsible business policy will be pressured to face pressure on the responsible business policy Continued weak performance; 4) The 4Q20 daily operating cost fell from $321,000, thanks to a 17% year-on-year reduction in employee costs (currently 70% of employees on duty) and long-term cost reduction measures; the company expects the average daily operating expenses in 2021 to be based on 4020 and may increase as business resumes; 5) The government will announce the implementation time of the new gaming tax (4% of the VIP business's revenue, 7% of the midfield business's revenue); 6) The timing of casino reopening will depend on the local epidemic control situation and after discussions with the Ministry of Health.

Jinjie Holdings paid a year-end dividend of 1.88 cents (equivalent to 15 Hong Kong cents). Plus an interim dividend of 0.29 cents, the company's dividend rate for FY2020 was 92%.

Profit forecasting and valuation

Based on the current trend unchanged, we keep our 2021/2022 eRevenue and EBITDA forecasts unchanged. We maintained our outperforming industry rating and maintained the company's target price at HK$12.00, corresponding to 12x2H21E+1H22EEV/EBITDA. The company's current stock price corresponds to 10x2022 EVVEBITDA, and our target price provides 20.2% upside.

risks

Uncertainty about the construction of the Naga3 project; uncertainty about the new gaming tax rate in Shupu Cha; and the release of Naga2 was slower than expected.