Core ideas:
The company disclosed its first-quarter results: net revenue from 21Q1 gaming was HK $2.41 billion, down 29.2% from a year earlier and up 10.1% from 20Q4. In terms of business, the recovery of 21Q1 VIP business is weaker than that of midfield business. VIP business GGR is down 59.4% from a year earlier, while GGR of midfield business is down 21.3% from a year earlier, and up 9.2% from a month-on-month increase of 3.4%. EBITDA of 21Q1 recorded a loss of 319 million yuan, which was slightly narrower than that of 20Q4 and in line with market expectations.
The data recovery of May Day Golden week is ranked from high to low: occupancy rate > gaming income > number of tourists.
In a public conference call after the results, the company's management said that the New Portugal Golden week received an average of 12500 visitors a day in the first three days of the week, 21 percent of that in the same period in 2019. In terms of gambling revenue data, the company's VIP business GGR recovered to 25% of the same period in 2019 in the first three days of May 1 this year, midfield business GGR recovered to 47%, and total gambling revenue returned to 40%. In terms of hotel occupancy, the occupancy rate of Lisboa New Portugal is close to 100%. Why are the above indicators differentiated? The main reason is that visitors to Australia stay longer and spend more per capita during the May Day holiday this year.
Lisboa is expected to open at the end of the second quarter. At present, Lisboa is waiting for the government to issue a business license, which is expected to open at the end of Q2. The Portuguese capital will provide 304 gaming tables, 1034 slot machines, 300 guest rooms and 6-8 restaurants. In terms of operating expenses, the daily operating expenses of Lisboa at the beginning of the business will be about HK $6-7 million, and the average daily Opex will reach HK $9-10 million after the end of property climbing.
Investment suggestion: the epidemic will still have a great impact on the operation of Macao's gaming industry in 2021, but the gaming industry has a monopoly attribute and the competition pattern is stable. With the reduction of the impact of the epidemic, the industry will further recover. Based on a valuation of HK $5.98 billion in the company's 2022 EBITDA, we give the company 12x EV/EBITDA (above the historical average and below the historical average + 1std) to reflect the trend of gradual recovery in the industry and expectations of thickening performance after the opening of the company in Portugal. It is calculated that the reasonable value of the company is HK $10.43 per share and the buy rating is maintained.
Risk tips: the spread of the epidemic in the mainland; the tightening of foreign exchange controls; the risk of renewal of gambling licences.