Second quarter 2021 results Review: in the second quarter of 2021, gross gaming revenue from SJM increased by 200.0% year-on-year, up 7.5% from the previous quarter to HK $2.85 billion (same below). The total net income increased by 206.6% over the same period last year, an increase of 10.7% from the previous month to 2.74 billion yuan. VIP gambling revenue, midfield gambling revenue and slot machine gambling revenue decreased by 23.7% month-on-month (affected by the bottom winning rate), increased by 13.8% and increased by 27.6% respectively, while non-gambling revenue increased by 17.9% month-on-month. EBITDA's loss narrowed to-190 million yuan from-320 million yuan in the first quarter. During the period, the net profit and loss was 820 million yuan, which was affected by the initial expenses for the opening of "Lisboa Shanghai" (400 million yuan). The overall market share in the second quarter was 11.6%, which remained stable.

The performance of Lisboa New and other casinos: gaming revenues in Lisboa New, other proprietary and satellite casinos increased by 4.8 per cent, 13.3 per cent and 7.3 per cent, respectively, while their EBITDA losses were-60 million yuan,-70 million yuan and-7 million yuan respectively (core EBITDA losses continue to narrow).

Lisboa Upper opened on July 30: at the opening of the first phase, the group launched 150 newly approved midfield tables, more than 500 hotel rooms and seven restaurants under the brand name. Other facilities (such as Chinese duty-free shops and Palazzo Versace/Karl Lagerfel-branded hotels) will be gradually launched at a later time. The average daily operating expenditure for the opening of the first phase is estimated to be about $4.8 million, and then it may rise to $9 million (at the time of full opening). It is expected that when revenue returns to 30% of the level in 2019, Lisboa Upper will be able to break even. In addition, the climbing period of the project is expected to be about 6 to 12 months. As today's tourists mainly like to travel and spend in Cotai City, the launch of "Lisboa Upper" will greatly enhance the group's competitive advantage, especially in Coastal City, where there are no projects before. In addition, in view of the larger scale of Lisboa Upper and the provision of differentiated products, the Group plans to activate unseen customers to Lisboa Upper; we believe that this project will greatly boost the growth of the group when the passenger flow returns to normal and the epidemic stabilizes.

Target price of HK $10.81, maintain buy rating: although recent changes in the epidemic have caused uncertainty about Macau's short-term recovery, we believe that the epidemic will always be under control / one day in the past. Macao is one of the hot spots in the world, and the squeeze demand of Chinese tourists is strong. We believe that Macao will have better prospects in the long run. 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 $10.81, which is based on the 2023 EBITDA valuation of Lisboa, other self-promoted casinos and satellite casinos and other businesses.