First quarter 2021 results Review: in the first quarter of 2021, gross gaming revenue from SJM fell 31.0 per cent year-on-year, increasing by 9.0 per cent month-on-month to HK $2.65 billion (same as below). The total net income decreased by 28.8% compared with the same period last year, while the month-on-month increase increased by 10.0% to 2.48 billion yuan. VIP gaming revenue, midfield gaming revenue and slot machine gaming revenue increased by 3.4% month-on-month (benefiting from the increase in net profit rate), 9.2% and 33.3%, respectively. Despite the rapid growth of the midfield business, EBITDA recorded a loss of-320 million yuan (similar to the fourth quarter of last year). The net profit loss was 650 million yuan (an increase over the previous quarter), affected by the upfront expenses for the opening of "Lisboa Upper". The overall market share in the first quarter was 11.6%, which remained stable.
The Lisboa New Casino will be repositioned to promote the midfield and high-end midfield business: as the future growth of the industry is mainly in the midfield and high-end midfield business, SJM is also restructuring the promotion department of the Lisboa New Casino and repositioning the project to promote its midfield and high-end midfield business. The group has increased the number of salespeople and optimized the system and analysis of customer management, as well as reducing the average daily room rate to increase hotel occupancy. In the past, only about 1% of gamblers stayed in hotels, but now it has risen to about 50%, and the rate is expected to continue to rise in the future. In addition, after the repositioning of the project, it is expected that the occupancy rate of the hotel, the performance of gaming revenue and the quality of customers will be improved in the future.
Lisboa Upper is expected to be launched at the end of the second quarter: the construction of the project has been completed at the end of 2019 and is undergoing final acceptance by government agencies; it is expected to be launched by the end of the second quarter. At the opening of the first phase, it is believed that the new project will provide 304 gaming tables (of which it is estimated that 150,200 gaming tables are new wholesale, the rest will be redeployed from existing projects), 1034 slot machines, 1034 hotel rooms of the "Upper Lisboa" brand, 6-8 restaurants and a small number of retail outlets. Given the size and high-end positioning of Lisboa Shangri-Lisboa, we believe that the launch of this project will greatly boost the growth and competitiveness of the group in the future.
The target price is HK $12.70 and the buy rating is maintained: vaccination continues due to the Group's first-quarter results in line with expectations and the strong squeeze demand from Chinese tourists; we believe that Macau's recovery will continue. In addition, the launch of "Lisboa Shanghai" will greatly enhance the group's long-term growth and competitive advantage, and we continue to be optimistic about the future development of SJM. Maintain the buy rating. The target price is HK $12.70, which is based on the EBITDA valuation of the new Lisboa Casino, other self-promoted casinos and satellite casinos and other businesses in 2022, plus the valuation of the new project.