PALASINO (02536): After 7 transactions, who will be the first to lift the ban?

After more than 5 months of listing, the stock price of PALASINO (02536), which is "burning high," is about to face a "lifting ban exam". It is noted that the first six-month lock-up period after "Europe's first gaming stock" PALASINO landed on the Hong Kong stock market will end on September 25. According to the company's previous final offer price and allocation announcement, the shares held by the initial public offering investors and cornerstone investors will be unlocked at that time, with a total unlock proportion exceeding 12% of the company's total issued share capital. For newly listed stocks, the lifting of the lock-up period usually serves as a pressure test on the stock price, as important shareholders from the angel round to the international placement before listing will evaluate whether to exit after the lifting, especially for targets whose stock prices have been rising steadily after listing, the selling pressure after the lifting should not be underestimated. Taking PALASINO as an example, although the company's first annual report after listing showed poor performance, with net profit shrinking by 80% to 9.492 million Hong Kong dollars in the 2024 fiscal year with only a slight increase in revenue, the company's stock price still maintained a strong upward trend overall. In the first half of the year, PALASINO's stock price soared to 7.19 Hong Kong dollars at one point, despite a sharp pullback in early August, the stock price is still holding at a relatively high level of 4.25 Hong Kong dollars, more than a 60% increase from the issue price of 2.6 Hong Kong dollars. A huge unlock will soon test the stock price As a company that combines gaming and leisure, PALASINO is spun off from FE CONSORT INTL (00035), and its business covers gaming operations in the Czech Republic and hotel operations in Germany and Austria. According to public information, after listing, FE CONSORT INTL holds 73.21% of PALASINO through Ample Bonus; Dateplum Harvest Limited, an initial public offering investor, holds 8.93%. In addition, PALASINO also introduced a cornerstone investor, Ups International Technology Co., Ltd., a Taiwanese provider of slot machines and social games, which subscribed to 70 million Hong Kong dollars of shares in the offering, accounting for 3.4% of the total share capital after the IPO. As mentioned earlier, the stock price trend of PALASINO after landing on the Hong Kong stock market can be described as strong, with the stock price even touching 7.19 Hong Kong dollars at one point two months after listing, nearly 1.8 times the issue price. Considering the twists and turns in the Hong Kong stock market this year, aside from active capital speculation, the rising trend of PALASINO's stock price may also be related to the company's scarcity. It is understood that the vast majority of gaming stocks in the Hong Kong stock market mainly operate in Macau or Southeast Asia. PALASINO is currently the only comprehensive European gaming and entertainment company owned and controlled by a Hong Kong-listed company, which undoubtedly attracts attention from Hong Kong's local market funds. Moreover, PALASINO has also obtained an online gaming license from the Malta Gaming Authority, which may also be considered a plus for the company's stock supporters. However, it should be noted that after peaking at the end of May, PALASINO's stock price showed signs of decline, and even in early last month, the company's stock price plummeted by 30% in just one week, breaking the trend of price increase. As we approach mid-September, there are only a dozen days left until the important shareholders of PALASINO are unlocked. With a flood of chips becoming available, the substantial unrealized gains of important shareholders may turn into selling pressure on the market at any time. According to the allocation announcement released by PALASINO, the 8.93% shareholding held by Dateplum Harvest Limited, an initial public offering investor, and the 3.4% shareholding held by cornerstone investor Ups International Technology Co., Ltd., will both be unlocked at the end of this month. If these two shareholders choose to "close the bag for safety," it will undoubtedly have a significant impact on the stock price. From a liquidity perspective, the average daily turnover of PALASINO has been around 1 million Hong Kong dollars since September, with only one day exceeding 2 million Hong Kong dollars on September 10, and the total turnover was only 5.5857 million Hong Kong dollars on that day, making it difficult to absorb a concentrated selling pressure of hundreds of millions of Hong Kong dollars. In addition, the lock-up period for the controlling shareholders of PALASINO, who hold over 70% of the shares, will end on September 25 and March 25, 2025, respectively, which means that the initial unlockable shares held by the major shareholders can be listed for trading as early as September 26. With a vast amount of unlockable shares soon to be released, it is probably time to test the true value of PALASINO. Sudden increase in profit pressure and doubts about growth For a listed company, performance is the best touchstone to evaluate its investment value. Although PALASINO is a scarce European gaming concept stock in the Hong Kong stock market, it is regrettable that the current performance of the company is hardly enticing for value investors focusing on fundamentals. In the 2024 financial year, PALASINO's revenue increased by 7% to 564 million Hong Kong dollars, while net profit shrank by nearly 80% to 9.492 million Hong Kong dollars. The significant decline in profit is related to the expenses incurred by PALASINO in its rush to go public during the period. Data shows that the expenses incurred by PALASINO for listing in the 24 fiscal year were 23.537 million Hong Kong dollars, but even after excluding this expense, the company's net profit still showed a negative growth on a year-on-year basis. Looking at the revenue breakdown, PALASINO's revenue comes from gaming operations and hotel operations. The gaming business mainly comes from entertainment venues in the Czech Republic, contributing 402 million Hong Kong dollars in revenue during the period, with a growth rate of only 3%. The lackluster growth of the gaming business is not surprising, as even in Europe, competition among casino operators is fierce. According to information from Zhishi Consulting, as of the end of 2022, the Czech Republic had 472 physical entertainment venues and 362Casino hall. In 2022, according to the total number of slot machines in the Czech Republic, the market share of the three major casino operators is 35.4%, while PALASINO ranks ninth among casino operators, with a market share of only 2.5%; according to total gambling revenue, PALASINO's market share in the physical slot machine industry in the Czech Republic is 5.3%.Looking at the hotel business again, in the 24th fiscal year, the revenue of PALASINO's business was HKD 162 million, an increase of 17% year-on-year. It is reported that this was due to the increase in hotel occupancy rates and average daily revenue. It is worth mentioning that although PALASINO's casino is located in the Czech Republic, over 95% of the players at the company's casino come from neighboring countries such as Austria and Germany, with only a very small portion of revenue coming from local Czech residents. In other words, the company's financial prospects are closely related to the overall economic, social, and market conditions in Austria and Germany. Although in recent years PALASINO has been actively nurturing new growth points, such as obtaining an online gambling license in Malta, whether these new businesses can smoothly take over remains to be seen. The confusion in growth expectations is obviously not a good thing for PALASINO, whose stock price has already experienced a round of speculation after going public. Now, facing another challenge of lifting restrictions, it seems uncertain whether PALASINO's stock price can hold stable under multiple challenges. This situation certainly raises a big question mark.