Key investment points

Earnings were strong, and earnings slightly exceeded expectations. On the revenue side, 3Q24 achieved net revenue of HK$7.5 billion, recovering to 91.0% in 3Q19. Net gaming/non-gaming revenue of HK$7/0.5 billion, respectively, recovered to 86.8%/277.6% in the same period in '19, respectively. On the profit side, 3Q24's adjusted EBITDA was HK$1.04 billion, slightly exceeding expectations of HK$1 billion, and recovered to 109.2% in the same period in '19. 3Q24 achieved a total revenue of HK$7.5 billion, a sharp increase of 31.0% year over year, and recovered to 79.0% of 3Q19; among them, VIP/midfielders (including slots) earned HK$0.78/6.72 billion, respectively, and recovered to 26.9%/101.8% in the same period in 2019 (lower than 15.2pct/5.3pct for the industry, respectively, under the SPC's caliber). The overall performance of the company's Q3 Boshou was strong, driving up profits and increasing its market share by 1.3 pcts to 13.9% month-on-month.

New properties turn losses into profits, continuously improve the environment and service quality, and drive the market share to continue to rise. On 3Q24, Lisboa's single property achieved a profit of HK$1.42 billion, an increase of 17.2% over the previous month, driving a market share increase of 0.4 pct month-on-month. The adjusted EBITDA of a single property in Lisboa reached HK$0.165 billion, turning a year-on-year loss into a profit. Looking forward to the future, the company will continue to improve service quality. The specific measures are as follows: 1) The company recently launched a top VIP program called Novel and Novel to provide more flexible rewards methods for high-end midfielders; 2) Management said that Shanghai Lisboa will open more casual restaurants and lobbies in 4Q24 and early '25 (concerts can be held at that time); 3) The company will renovate the Sky Phoenix VIP area, which opened in May '24, to transform some of the previous VIP spaces into 56 luxury rooms Suites and more restaurants. Management believes that after completing the above renovation, the market share of the company's high-end midmarket is expected to continue to rise; 4) Currently, 150 hotel rooms are offered to customers from Grand Lisboa every day, and the synergy between the properties is quite obvious.

The average daily operating expenses of the 3Q24 company were about HK$20.9 million, up 5.2% from the previous month. We judge that the increase in summer passenger traffic mainly led to higher operating costs. By property, the average daily operating cost of Shanghai Lisboa was about HK$7.6 million, an increase of 8.4% over the previous month. The main reason was that the property was still climbing and the number of marketers continued to grow. The total daily operating expenses of properties other than Upper Lisboa were HK$13.3 million, up 3.1% from the previous month, and remained stable overall.

Profit forecast and investment rating: We maintain the company's 2024-2026 net income forecast at HK$28.92/31.41/33.52 billion; maintain the adjusted property EBITDA forecast at HK$3.79/4.71/5.43 billion; and the current stock price corresponds to 2024/2025/2026 EV/EBITDA of 11.7/9.4/8.2 times, respectively. Our target price is HK$3.0, maintaining a “buy” rating.

Risk warning: Macau's tourism recovery fell short of expectations, China's macroeconomic growth fell short of expectations, overseas gaming markets were diverted, and VIP recovery fell short of expectations.