On May 15, 2023, Aobo Holdings announced results for the first quarter of 2023.
1Q23 The company's net revenue increased 57.6% year over year to HK$400 million, and adjusted EBITDA changed from negative to positive year over year to HK$31 million. 1) 1Q23 achieved net revenue of HK$400 million, up 57.6% year on year, and recovered to 46.2% in the same period in 2019; 2) 1Q23's gaming/non-gaming business contributed HK$3705/295 million in net revenue respectively, with non-gaming accounting for 7.4%, a significant increase from 2.1% in the same period in 2019. The investment of the Shanghai Lisboa Integrated Resort was effective in driving the transformation of non-gaming. 3) 1Q23 achieved an adjusted EBITDA of HK$31 million, which changed from negative to positive and recovered to 2.9% in the same period in 2019, with a net loss of HK$869 million, which was 32.2% narrower than the same period in 2022; 4) In terms of profitability, the company's overall EBITDA rate for the first quarter of 2023 was 0.8%, down from 12.4% in the same period in 2019.
Gaming business: 1Q23's total gaming revenue increased 53.0% year-on-year to HK$3,888 million, recovering to 37.3% in the same period in 2019, lower than the overall recovery of 45.5% in Macau. The company's closing share declined to 11.6% from 14.1 in 2019. 1Q23's gross revenue from VIP/ Midfield/ Slot gaming was HK$2.01/34.35/ HK$252 million, which recovered to 5.1%/55.5%/86.9% of the same period in 2019, respectively. Among them, the recovery in VIP and midfield gaming was less than that of the industry as a whole (VIP/midfield revenue in the Macau gaming industry in 2023 recovered 23.0%/67.0% from 19, respectively); in terms of market share, it was lower than 1Q23's general exp/midfield/VIP market share was 11.6%/15.0%/2.4% respectively in 2019. The annual market share level is 14.1%/18.1%/10.9%. We believe that the poor performance of the company's main gaming business is mainly hampered by 1) the sharp reduction in the number of corporate gaming tables by nearly 30% compared to 2019; 2) the closure of a large number of satellite casinos; and 3) the low win rates of major casinos in midfield and VIP gaming.
Non-gaming business: Hotel ADR and occupancy rates have increased significantly. In the first quarter of 2023, the average daily room rate at the Grand Lisboa Resort/Grand Lisboa Hotel/Huili Hotel/Sofitel Juropo was HK$1368/901/198/1218. The occupancy rate was 83.7%/85.3%/92.6/84.5 respectively. The occupancy rate was significantly higher than the average occupancy rate of Macau hotels in the first quarter of 74.7%. Affected by factors such as a shortage of personnel, the hotel rooms actually put into operation in Shanghai Lisboa in the first quarter were only a fraction of the total room capacity. The company's management expects 1,882 guest rooms and suites to be operated by the end of the year, reaching 100% of the total room capacity.
Cost control was strict, and operating expenses were reduced by 8.1% month-on-month in 1Q23. Following a steady recovery on the revenue side, the company continued to maintain good cost control. The 1Q23 operating expenses were HK$1,493 million, a decrease of HK$132 million over the same period in 2019, a slight increase of 2% over the same period in 2019.
Profit forecasts and investment ratings: We maintain the company's net revenue forecast for 2023-2025 at 247.48/29888/HK$31,875 million, and the 2023-2025 adjusted property EBITDA forecast of HK$33.54/41.03/4406 million. The current stock price corresponds to 15.25/12.46/11.61 times EV/adjusted EBITDA, maintaining a “neutral” rating.
Risk warning: The recovery of Macau's tourism industry fell short of expectations, the mainland's signing policy was tightened beyond expectations, and the overseas gaming market was diverted.