Galaxy Entertainment Group (27 HK), Xiaomi Corporation (1810 HK)

🎰 Galaxy Entertainment Group (27 HK) – Gaining Market Share in Macau’s Robust Gaming Sector

Recommendation: BUY
Target Price: HKD 45.28
Stop Loss: Not specified
Date of Recommendation: 3rd September 2024
Broker: MIB Securities (Hong Kong) Ltd

Investment Thesis: Galaxy Entertainment Group – Leading the Recovery in Macau’s Gaming Industry

Galaxy Entertainment Group (GEG) continues to gain momentum in Macau’s gaming industry, reflecting the robust recovery in both the VIP and mass market segments. The company has successfully increased its market share in 2Q24, and its management remains optimistic about further gains in the near term, driven by higher property visitation and sustained demand from Chinese players.

Strong Market Recovery: Macau’s Gross Gaming Revenue (GGR) reached MOP19.75 billion in August 2024, up 14.8% year-on-year (YoY) and 6.2% month-on-month (MoM). This growth is indicative of the ongoing recovery in Macau’s gaming sector, with the mass segment now accounting for 75%-80% of total gaming revenue, surpassing pre-Covid-19 levels. GEG has been a key beneficiary of this trend, gaining market share during this period.
VIP and Mass Market Segments: The VIP segment has reached 37%-47% of its pre-Covid-19 levels, while the mass market segment has surged to 108%-116% of its pre-pandemic performance. GEG’s ability to capitalize on this shift towards the mass market, coupled with its strategic investments in premium facilities, has positioned the company for continued success.
Management’s Positive Outlook: GEG’s management observed a significant pick-up in market momentum from the second half of July, which continued into August. The company expects this trend to persist, further boosting its market share compared to 2Q24.

Valuation and Financials:
Galaxy Entertainment is currently trading near its target price of HKD 45.28, with a strong potential for further gains as Macau’s gaming industry continues its robust recovery. The company’s strategic focus on premium mass market segments and its ability to attract high-value players provide a solid foundation for sustained growth.

Share Price Catalysts:

Continued recovery in Macau’s GGR, particularly in the mass market segment.
Further market share gains driven by increased property visitation and strategic investments.
Positive momentum in VIP and premium mass market segments.

📱 Xiaomi Corporation (1810 HK) – Sustained Growth with Positive Outlook from S&P Global

Recommendation: BUY
Target Price: HKD 23.42
Stop Loss: Not specified
Date of Recommendation: 3rd September 2024
Broker: MIB Securities (Hong Kong) Ltd

Investment Thesis: Xiaomi Corporation – Riding High on Strong Smartphone Sales and EV Progress

Xiaomi Corporation continues to maintain its strong market position, with recent developments reflecting its growing influence in both the smartphone and electric vehicle (EV) markets. The company’s rating outlook was recently upgraded by S&P Global, reflecting confidence in Xiaomi’s ability to sustain positive cash flow and support its ambitious EV investments.

S&P Global Upgrade: On 2nd September 2024, S&P Global upgraded Xiaomi’s rating outlook to positive from stable, affirming its “BBB-” long-term issuer credit rating. This upgrade is based on Xiaomi’s sustained global market share in the smartphone business (13-15%) and its increasing monetization from internet services. S&P expects Xiaomi to maintain positive free cash flow, providing a strong financial buffer for its EV investments over the next few years.
Strong Smartphone Sales: Xiaomi’s smartphone business continues to thrive, with the company achieving over 10,000 vehicle deliveries in August 2024. This marks the third consecutive month that Xiaomi has surpassed its delivery targets, underscoring the company’s execution capabilities and market demand.
Electric Vehicle Ambitions: Xiaomi Auto, the company’s EV arm, is on track to meet its annual delivery target of 100,000 vehicles ahead of schedule, potentially by November 2024. This rapid progress highlights Xiaomi’s commitment to becoming a key player in the global EV market, leveraging its technological expertise and strong brand presence.

Valuation and Financials:
Xiaomi is currently trading at HKD 23.42, with significant upside potential as it continues to expand its market share and diversify its revenue streams. The company’s strong financial position and positive outlook from S&P Global further enhance its attractiveness as an investment.

Share Price Catalysts:

Continued growth in global smartphone market share and increased monetization of internet services.
Successful execution of EV delivery targets and progress in the automotive sector.
Positive rating outlook from S&P Global, reflecting strong financial health and future growth potential.
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