After the market on February 2, Abo Technology Holdings (08279.HK, hereinafter referred to as “Yabo Technology”) announced a positive profit forecast for the twelve months ended December 31, 2023 (“Second Mid-Term 2023”). According to forecasts, in 2023, Yabo Technology will record a profit of not less than HK$22 million during the period, while in fiscal year 2022 it will record a loss of HK$131 million.
The reason why ADP achieved a significant increase in revenue and profit in the second mid-term of 2023 was no less than HK$237 million, mainly due to the complete consolidation of Macau Express Group's financial statements into the ACP report, and revenue increased by about HK$106 million compared to FY2022; electronic payment, lifestyle services, and gaming and entertainment businesses in Macau, driven by events such as the increase in the number of visitors to Macau in 2023 and the fact that the Macau SAR government did not extend the exemption from transaction service fees for small and medium-sized enterprises after the end of February 2023, and revenue increased by no less than HK$68 million over the previous year; In addition, there was a steady increase in lottery hardware sales and lottery consignment business, and revenue increased by no less than HK$60 million over the same period last year.
Overall, with strong support from Macau's electronic payment, lifestyle services, and gaming and entertainment businesses, and the steady operation of the lottery business, the company is gradually taking shape in a diversified development pattern of lottery, lifestyle services, games and entertainment, marketing technology services, and e-commerce, with electronic payments as the axis. It is of great practical significance and long-term strategic value for ADP Technology, which was selected as a constituent stock in the MSCI Global Micro Stock Index at the end of November 2023 and is gradually becoming more well-known in the international capital market.
Next, we might as well conduct a detailed analysis of the above two main business sectors to further explore the commercial value and development prospects of Yabo Technology's business.
1. Electronic payment business: Strong growth, continuous expansion of coverage, future or continuing to benefit from policy support
Based on the data of the three-quarter report released by ADP Technology in November 2023, the share of ADP's electronic payment business operated by Macau Express as an entity has greatly surpassed the lottery business. The revenue from the electronic payment business became an important support and main value driver for the continuous growth of ADB Technology's performance. It only took a year and a half. In the author's opinion, there are two main reasons for being able to achieve such rapid growth:
On the one hand, Macau Express is speeding up strategic cooperation with Alibaba Group and Ant Group behind Abo Technology in e-commerce and digital media entertainment, and is gradually achieving cross-synergy effects at the business and market levels. As the leading mobile payment e-wallet in Macau, MPay Macau Wallet, a subsidiary of Macau Pass, and AliPay+ joined forces to launch a comprehensive and innovative digital cross-border solution in 2023, striving to create a smart wallet that facilitates global travel for Macau residents, serves Macau residents to solve the payment pain points of overseas travel, enhance the payment experience, and facilitate global travel and safe spending for Macau residents.
In February 2023, the company signed strategic cooperation agreements with Galaxy Entertainment, Damai, Alibaba Pictures, etc., to reach more users through Galaxy Entertainment's infrastructure resources, Damai's online ticketing platform, and Alibaba Pictures's entire industry chain entertainment platform, relying on the convenient and inclusive development of Macau Express electronic payments. While building up a larger user base for Macau Pass, this move has created favorable conditions for the long-term development of Macau Pass's non-payment sector.
The B-side cooperation is not limited to this. In May, Macau Express and Samsung Electronics Hong Kong Co., Ltd. signed a memorandum of understanding. The two sides agreed to use their resources, advantages and experience to cooperate in the fields of e-finance, e-commerce, marketing, smart city construction and the Internet of Things to achieve all-round interaction in digital finance, promote the construction of smart cities in Macau, and provide users with high-quality products or services to promote the development of the Hong Kong and Macao markets.
In November, Macau Pass made a splendid appearance at the first Asian Performance and Entertainment Industry Expo, using Macau as a hub to gather the strength of cultural tourism, performance and entertainment industries in the Asia-Pacific region, achieve high-quality integrated cultural tourism development, promote the sustainable development of the Asia-Pacific performance and entertainment industry, and promote more outstanding cultural performances with Chinese characteristics, the spirit of Macau, and the wisdom of the Asia-Pacific region to the world, helping to connect, promote innovation and cultural integration between Macau and the world's performing arts markets.
On the other hand, the performance of Macau Pass depends critically on the prosperity of the Macau economy. Along with the recovery of the Macau economy, revenue from Macau Pass-related businesses will naturally soar.
Since January 2023, Hong Kong and Macau reopened their doors, the economy has recovered rapidly. In particular, against the backdrop of rapid release in tourism demand, Macau's economy, which is dominated by tourism, continues to pick up. According to data released by the Statistics and Census Bureau of the Macao Special Administrative Region Government, Macau's tourism industry showed a marked recovery trend in 2023. The number of inbound visitors exceeded 28 million throughout the year, an increase of 3.9 times over the previous year. The rise in the number of visitors has further boosted the growth of Macau's consumer retail industry. The Macao Government Statistics and Census Bureau's “Macau Economic Quarterly, Third Quarter 2023” shows that in the third quarter of 2023, Macau's service exports rose 284.1% year on year, and total tourist consumption rose 576.7% year on year, driving Macau's total economy to grow by 116.1% year on year.
In August, the “MGM x mPay Community Consumption Together” campaign launched by MGM and Macau Pass was successfully held to stimulate community consumption in the form of consumer rewards and expand customer flow for SME merchants. The event attracted nearly 100,000 participants. During this period, the transaction amount of more than 800 small and medium-sized merchants tripled, and the number of transactions of more than 500 merchants more than doubled month-on-month. Through the convenience and inclusiveness of Macau Pass electronic payments, the goal of revitalizing the community economy and accurately supporting SMEs has been achieved.
On February 1 of this year, Macau Pass and Flying Pig announced the launch of a joint card, which will land in the “Galaxy Macau” luxury integrated resort. The new co-branded card supports NFC functions and is interoperable with mobile payment tools in both directions. The new digital travel consumption project will bring new commercial growth to Macau travel companies, share the results of digital tourism and diversified development, and further enhance their imagination.
In the longer term, influenced by market potential and the company's strategic layout, the development of the company's electronic payment business is highly imaginable. Under the impetus of the central government and the Macao SAR government, policies favorable to electronic payments have been introduced frequently. As early as 2021, the Macao SAR Government launched the “Easy to Use” service, a comprehensive payment system, which allows Macau merchants to accept electronic payment methods through various forms such as payment terminals and QR codes. In order to stimulate local demand in Macau, the “Electronic Consumer Discount Program” was launched to accelerate the popularity of electronic payments. Furthermore, with the implementation of Macau's “Second Five-Year Plan” (2021-2025), the digital development of Macau is expected to advance further.
Furthermore, the “Outline Development Plan for the Guangdong-Hong Kong-Macao Greater Bay Area” also clearly states that it is necessary to jointly promote the interconnection of electronic payment systems in the Greater Bay Area. Cross-border connectivity of payment platforms and the spread of electronic payments in retail, transportation and travel scenarios have not only boosted the prosperity and development of the cross-border payment and cultural tourism industries in Guangdong and Macao, but will also further promote the integration of the Greater Bay Area lifestyle.
As a result, the local mobile payment market in Macau has developed rapidly, and the number of transactions is growing rapidly. According to the Macau Monetary Authority, the number of mobile payment transactions in Macau increased from about 193 million in 2021 to about 266 million in 2022, an increase of about 37.8% over the previous year. The transaction value also increased from about MOP 18.52 billion in 2021 to around MOP 25.86 billion in 2022, an increase of about 39.6% over the previous year. It is worth mentioning that in the first three quarters of 2023, the total transaction value and number of mobile payment transactions both increased 13% year over year. The increase in transaction value and volume means that users' demand and trust in mobile payments has further expanded, user stickiness has increased, and the mobile payment market in Macau still needs to be further explored.
Focusing on the corporate level, since MPay, a subsidiary of Macau Pass, was approved in 2019 as the first overseas e-wallet launched by financial institutions headquartered overseas in China, together with AliPay+, continued to expand the scope of mPay's cross-border payment business in the second half of 2023. It has covered more than 40 countries including the United States, the United Kingdom, Switzerland, France, the United Arab Emirates, Australia, Singapore, Japan, and South Korea, and announced the launch of mPay cross-border payments in mainland China and Hong Kong in September 2023.
On December 15, 2023, Macau Pass was approved to cooperate with seven major overseas e-wallets Tinaba (Italy), OCBC and Changi Pay (Singapore), myPB by Public Bank (Malaysia), Toss Pay, NAVER Pay (Korea), and Hipay (Mongolia). Following mainland Alipay, AlipayHK, WeChat Pay, and the Juyi e-wallets launched by various banks in Macau, Macau Pass also supports South Korea's Kakao Pay, Philippine GCash, Malaysia Touch 'n Go eWallet, and Thai TrueMoney. With innovative one-stop payment solutions, Macau Pass will accelerate the digital transformation of local merchants in Macau, create a connected digital ecosystem for international payments in the Macau market, solve the pain points of cross-border payments for international tourists, and help enterprises discover new marketing growth opportunities.
Predictably, as the number of countries covered by the Macau Pass continues to increase, it can provide convenient consumer services for Macau residents to travel globally, and can also enable mPay to provide one-stop payment services from local to cross-border consumption in Macau, thus creating a cross-border electronic payment ecosystem.
In 2024, the Macao SAR Government will continue to adopt the “1+4" moderately diversified development strategy, promote the construction of a world tourism and leisure center, and promote diversified development of tourism and leisure. The Macau Association actively cooperates with the SAR government to guide visitors to food, lodging, travel, shopping and entertainment with technological wisdom to stimulate the community's consumption vitality.
2. Lottery and related business: The growth rate of consignment sales is growing steadily, and it is expected that it will continue to benefit from the promotion of tournaments
Since the beginning of 2007, Yabo Technology has been involved in the lottery industry and has gradually developed into a business line focusing on lottery ticket sales and supporting services and lottery hardware sales.
According to the 2023 three-quarter report, in January-September, the company's lottery hardware business revenue was about HK$103 million, an increase of 5.5% over the previous year. The company has been leading the Chinese sports lottery terminal market in recent years. Due to high policy barriers and considering the costs brought about by switching products, Yabo Technology has a first-mover advantage in market competition. In the first nine months of 2023, Yabo Technology won multiple lottery hardware tenders, including sports lottery centers in Anhui, Chongqing, Hubei, Hunan, Sichuan, Guizhou, Hainan, Zhejiang, Jiangsu, Shanghai, Fujian, and Guangdong. In comparison, revenue from lottery ticket sales and ancillary services grew more rapidly, recording revenue of about HK$62.89 million, an increase of 61.1% over the previous year.
Affected by positive factors such as the development of large-scale events such as the Asian Games and the Women's World Cup, that is, the launch of new lottery tickets, etc., the overall performance of the national lottery in 2023 was very popular. According to data published on the Ministry of Finance's website, in 2023, the country sold a total of 579.696 billion yuan of lottery tickets, an increase of 36.5% over the previous year. Among them, welfare lottery agencies sold 19.441 billion yuan, up 31.3% year on year; sports lottery agencies sold 385.255 billion yuan, up 39.3% year on year.
The economic performance in 2023 fell short of expectations, but the lottery market became one of the few markets that bucked the trend. The lottery market attracted a lot of attention for a while. Looking at the dynamics of major lottery listed companies, most companies invariably crowd into the middle and lower reaches of the industry to seek profits with lower risk and lower thresholds. In the midst of continuous crowding and competition in the middle and downstream space in the market, businesses such as lottery channels, consignment sales, and peripheral services have already entered a new stage of competition.
More traditional operators are having to face new market conditions. For example, with changes in the concept of lottery buyers and the functions and forms of dropshipping outlets, competition in the middle and downstream of the industry is intensifying along with the intervention of more business entities. Under such circumstances, the market will tend to select operators who can more quickly integrate into the rhythm of the new era.
As a leading enterprise in the industrial chain, Yabo Technology has an extremely accurate grasp of the pace of industrial development.
On the one hand, the company sells lottery tickets domestically through physical lottery sales channels mainly through retail outlets operated by Alibaba Group. Based on this, as of September 30, 2023, the number of the company's cooperative outlets increased by about 10% compared to the same period in 2022. The number of outlets and average lottery ticket sales both increased, driving the company's revenue from selling lottery tickets through retail outlets by about 68% year over year.
On the other hand, by providing channel operation and platform services for lottery resources, further user growth has been achieved in the fierce market competition. The company operates special lottery resource channels on Taobao and Alipay to provide lottery-related services and resources to facilitate online users to obtain relevant information and resources to meet the different needs of lottery players. Focusing on the business itself, although there is no internet lottery sales, through this platform, it can not only further enhance user stickiness, but also play a role in attracting new users, laying a solid user base for possible future policies to license online lottery products on behalf of others.
Considering that 2024 has a series of top international sporting events such as the Olympics, the European Cup, and the Asian Cup (in progress), referring to historical data, it can be seen that the sports lottery business, especially quiz sports lottery, will be the main beneficiary area. According to the data, at the Qatar World Cup last year, the average monthly lottery sales volume in November exceeded 120% + of the same period in 2018. Among them, sports lottery sales amounted to 38.766 billion yuan, an increase of 94.6% over the previous year. This also means that demand for sports lottery consumption will also be in a strong growth zone in the future. Yabo Technology is likely to use its lottery ticket sales business to become the main beneficiary driven by the tournament, thus achieving further growth.
Conclusion:
All in all, based on the continuous recovery of Macau's economy and the continuous introduction of favorable policies, Yabo Technology can be expected to develop in the future with its advantageous layout in the international electronic payment, digital lifestyle entertainment, and lottery business.
From the continuous announcement of policies and implementation to promote the development of the Guangdong-Hong Kong-Macao Greater Bay Area, almost every policy or important market trend will enable the development of various businesses of ADP Technology. As can be seen from Yabo Technology's continuous introduction of various new business layouts over the past year, the company is forging ahead and unleashing its competitive advantage. In the current broad racetrack, the long-term value potential of Yabo Technology needs to be further exploited. It has accumulated enough energy and is not limited to this.