4Q15 Results Beat Expectations, Upgrade to Accumulate

Transcription

1 GTJA Research 国 泰 君 安 研 究 Company Report: Wynn Macau (01128 HK) Noah Hudson 公 司 报 告 : 永 利 澳 门 (01128 HK) noah.hudson@gtjas.com 4Q15 Results Beat Expectations, Upgrade to Accumulate 2015 年 4 季 度 业 绩 好 于 预 期, 上 调 至 收 集 Wynn Macau s 4Q15 adjusted property EBITDA was US$160.1 million, down 33.6% YoY but 10.6% above our forecast. Adjusted property EBITDA increased QoQ for the first time in 5 quarters. Revenue was 9.6% higher than our forecast despite low VIP segment win rate of just 2.6%, the lowest since 1Q12. VIP win increased 6.7% QoQ, the first QoQ increase since 1Q14. Mass tables and slots combined revenue outperformed the market as slots handle surged 29.7% QoQ, the first QoQ increase since 2Q14. Rating: Accumulate Upgraded 评 级 : 收 集 ( 上 调 ) 6-18m TP 目 标 价 : HK$12.00 Revised from 原 目 标 价 : HK$9.30 Wynn Palace could be delayed past the contracted 25 June opening date. The contractor is behind and trying to catch up on construction work. Additionally, the new hotel won't be completed until sometime later this year. We revise up the Company's 2015 to 2017 adjusted property EBITDA forecasts by 2.4%, 7.3% and 9.9%, respectively, on higher forecasted revenue. We increase revenue forecasts by 2.0%, 10.0% and 15.0%, respectively. The higher revenue is partially offset by slightly lower forecasted EBITDA margins in 2016 and We forecast adjusted property EBITDA of HK$5,505 mn, HK$6,058 mn and HK$7,124 mn, respectively, representing growth of -43.7%, 10.1% and 17.6%. We increase our target price from HK$9.30 to HK$12.00 and upgrade our investment rating from "Neutral" to Accumulate. Share price 股 价 : Stock performance 股 价 表 现 (20) (40) (60) % change HK$8.680 永 利 澳 门 2015 年 第 4 季 度 经 调 整 后 的 物 业 EBITDA 为 亿 美 元, 同 比 下 降 33.6% 但 是 高 于 我 们 预 期 10.6% 调 整 后 的 物 业 EBITDA 5 个 季 度 以 来 第 一 次 实 现 环 比 提 升 尽 管 贵 宾 分 部 胜 率 下 降 至 2.6%, 是 2012 年 1 季 度 以 来 最 低 水 平, 但 是 收 入 高 于 我 们 预 期 9.6% 贵 宾 分 部 收 入 环 比 增 长 6.7%, 是 2014 年 第 1 季 度 以 来 第 一 次 实 现 环 比 增 长 中 场 和 角 子 机 合 并 收 入 表 现 好 于 市 场, 是 因 为 角 子 机 投 注 额 环 比 暴 涨 29.7%, 是 2014 年 第 2 季 度 以 来 第 一 次 实 现 环 比 增 长 永 利 皇 宫 开 幕 时 间 可 能 延 迟 至 约 定 的 6 月 25 日 以 后 承 包 商 正 在 尽 量 赶 上 它 已 经 延 迟 的 建 筑 工 作 进 度 另 外, 新 酒 店 在 今 年 晚 些 时 候 才 能 建 成 我 们 分 别 上 调 公 司 的 2015 年 至 2017 年 调 整 后 物 业 EBITDA 预 测 2.4% 7.3% 和 9.9%, 是 由 于 较 高 收 入 预 期 我 们 分 别 上 调 2015 年 至 2017 年 收 入 预 测 2.0% 10.0% 和 15.0% 由 于 2016 年 和 2017 年 较 低 的 EBITDA 利 润 率 预 期, 较 高 的 收 入 预 期 被 部 分 抵 消 了 我 们 分 别 预 期 2015 年 至 2017 年 调 整 后 物 业 EBITDA 为 亿 港 元 亿 港 元 和 亿 港 元, 相 当 于 -43.7% 10.1% 和 17.6% 的 增 长 我 们 将 目 标 价 从 9.30 港 元 上 调 至 港 元 并 且 上 调 投 资 评 级 由 中 性 至 收 集 (80) Feb-15 Apr-15 Jun-15 Aug-15 Oct-15 Dec-15 Feb-16 HSI Change in Share Price 股 价 变 动 1 M 1 个 月 WYNN MACAU 3 M 3 个 月 1 Y 1 年 Abs. % 绝 对 变 动 % 18.6 (12.8) (57.8) Rel. % to HS index 相 对 恒 指 变 动 % (35.4) Avg. share price(hk$) 平 均 股 价 ( 港 元 ) Source: Bloomberg, Guotai Junan International. Year End Turnover Net Profit EPS EPS PER BPS PBR DPS Yield ROE 年 结 收 入 股 东 净 利 每 股 净 利 每 股 净 利 变 动 市 盈 率 每 股 净 资 产 市 净 率 每 股 股 息 股 息 率 净 资 产 收 益 率 12/31 (HKD m) (HKD m) (HKD) ( %) (x) (HKD) (x) (HKD) (%) (%) 2013A 31,341 7, A 29,445 6, (16.3) F 19,090 2, (63.1) F 22,354 1, (23.8) F 26,796 1, (17.2) Shares in issue (m) 总 股 数 (m) 5,195.5 Major shareholder 大 股 东 Wynn Resorts (WYNN US) 72.2% Market cap. (HK$ m) 市 值 (HK$ m) 45,097.2 Free float (%) 自 由 流 通 比 率 (%) month average vol. 3 个 月 平 均 成 交 股 数 ( 000) 13,994.9 FY16 Net gearing (%) FY16 净 负 债 / 股 东 资 金 (%) Weeks high/low (HK$) 52 周 高 / 低 / FY16 Est. NAV (HK$) FY16 每 股 估 值 ( 港 元 ) 15.3 Source: the Company, Guotai Junan International. See the last page for disclaimer Page 1 of 9

2 4Q15 RESULTS Wynn Macau ( the Company ) s 4Q15 adjusted property EBITDA declined 33.6% YoY (down 1.7% QoQ) but beat our forecast by 10.6%. 4Q15 adjusted property EBITDA was US$160 million, the midpoint of the Company's expected range (US$156 million to US$164 million) announced by the Company on January 18. Adjusted property EBITDA margin decreased by 2.9 ppt YoY (up 1.0 ppt QoQ) to 28.8%, the first sequential margin increase in five quarters. The decline in 4Q15 adjusted property EBITDA was lower than that of operating margin as higher pre-opening costs was added back to EBITDA. Operating margin fell 6.4 ppt YoY (down 0.1 ppt QoQ) to 14.4%, the lowest level on record since 2Q11. Staff costs as a percentage of revenue increased to 18.8%, compared to 12.2% in 4Q14 and 16.8% in 3Q15. 4Q15 net revenue was 9.6% higher than we were expecting. In 4Q15, despite bad luck in the VIP segment (win rate of just 2.6%, the lowest since 1Q12), the Company's VIP win was 8.1% higher than our forecast as VIP turnover increased by 6.7% QoQ, the first sequential increase since 1Q14. Mass tables and slots revenue topped our forecast by 6.6%. 4Q15 net revenue declined 27.0% YoY (down 5.0% QoQ) to US$556 million on a 41.5% YoY (12.5% QoQ) contraction of the Company s VIP gross gaming revenue ("GGR"). The Company s VIP segment market share dropped to 9.1% in 4Q15 from 10.7% in 3Q15 and 10.1% in 4Q14. On the other hand, Wynn Macau s mass segment results picked up momentum while the Company continued to shift more resources from VIP to mass. Mass tables and slots combined gross revenue increased 0.9% QoQ during 4Q15, better than our expectations of a 5.4% QoQ decline, thanks to strong performance in slots. The Company s mass (tables and slots) market share rebounded slightly from 8.2% in 4Q14 and 8.7% in 3Q15 to 8.8% in 4Q15. Figure-1: Wynn Macau Market Share, Annual VIP Mass Market 18% Figure-2: Wynn Macau Market Share, Quarterly VIP Mass Market 16% 16% 14.7% 14% 14% 12% 10% 8% 11.9% 12.8% 9.3% 12.4% 11.5% 8.1% 8.3% 10.4% 8.9% 12% 10% 8% 11.3% 8.3% 11.9% 8.9% 10.1% 10.2% 8.2% 9.6% 11.5% 10.7% 9.1% 8.2% 8.7% 8.8% 6% % 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 Source: the Company, Gaming Inspection and Coordination Bureau Macao SAR. Source: the Company, Gaming Inspection and Coordination Bureau Macao SAR. The Company s 4Q15 VIP turnover was US$13.0 billion, down 37.0% YoY (up 6.7% QoQ), slightly worse than Macau s 35.7% YoY decline in VIP GGR. The average number of VIP tables was 192 in 4Q15, down from 228 tables in 4Q14 and 228 in 3Q15. VIP table game win as a percentage of turnover (calculated before commissions) for 4Q15 was 2.6%, lower than the expected range of 2.7% to 3.0% and lower than the 2.8% in 4Q14 and 3.2% in 3Q15. As a result, VIP gross win fell by 41.5% YoY to US$339 million. Wynn Macau s 4Q15 mass market (tables and slots) gross win was US$279 million, down 8.5% YoY (up 0.9% QoQ), outperforming the 14.5% YoY drop (0.6% QoQ decline) of Macau s mass GGR. Wynn Macau s 4Q15 mass market table games gross win was US$229 million, down 8.2% YoY (down 2.6% QoQ). Mass market table games win per unit per day decreased 25.8% YoY to US$9,965. Slot machine handle decreased just 2.8% YoY (surged 29.7% QoQ) to US$1,069 million See the last page for disclaimer Page 2 of 9

3 as the number of slot machines increased 10.7% YoY (but actually decreased 0.1% QoQ). Slot machine gross win decreased 9.9% YoY (surged 20.3% QoQ) to US$50 million, reflecting an 18.5% YoY drop (20.4% QoQ increase) in win per unit day to US$743. In 4Q15, Wynn Macau s revenue per available room slid 5.2% YoY (but was up 2.3% QoQ) to US$311. Hotel occupancy rate was 95.9% (down 2.3 ppt YoY yet up 0.4 ppt QoQ), while ADR fell 2.7% YoY (up 1.9% QoQ) to US$323. Table-1: Wynn Macau Results US$ million 4Q14 1Q15 2Q15 3Q15 4Q15 QoQ YoY Except ADR & RevPAR (% or ppt) (% or ppt) VIP Segment VIP turnover 20,700 17,100 15,537 12,218 13, % (37.0%) VIP gross win (12.5%) (41.5%) Win rate (% of turnover) 2.80% 2.80% 2.92% 3.17% 2.60% (0.6) ppt (0.2) ppt % of total gross win 65.5% 59.4% 63.6% 58.3% 54.8% (3.5) ppt (10.7) ppt Mass market tables gross win (2.6%) (8.2%) Slot Machines Slot machine handle 1,100 1,040 1, , % (2.8%) Slot machine gross win % (9.9%) Win rate (% of turnover) 5.08% 4.60% 4.98% 5.08% 4.71% (0.4) ppt (0.4) ppt Mass (tables & slots) gross win % (8.5%) % of total gross win 34.5% 36.9% 31.5% 37.7% 40.3% 2.5 ppt 5.8 ppt Commissions & discounts (171) (143) (135) (117) (98) (16.5%) (42.6%) Casino revenue (net) (4.9%) (27.2%) Average Occupancy Rate 98.6% 97.5% 96.4% 95.9% 96.3% 0.4 ppt (2.3) ppt Adjusted ADR (US$) % (2.7%) Adjusted RevPAR (US$) % (5.2%) Non-Casino Revenue (net) (7.3%) (24.4%) Total Operating Revenues (Net) (5.0%) (27.0%) Operating profit (5.7%) (49.4%) Operating profit margin 20.8% 18.6% 15.3% 14.5% 14.4% (0.1) ppt (6.4) ppt Adjusted property EBITDA (1.7%) (33.6%) Adjusted property EBITDA margin 31.7% 30.1% 28.1% 27.8% 28.8% 1.0 ppt (2.9) ppt Net profit % (54.5%) Net profit margin 18.4% 15.7% 11.9% 10.6% 11.4% 0.8 ppt (6.9) ppt Source: the Company, Guotai Junan International. OUTLOOK Wynn Palace opening could be delayed past the 25 June 2016 contracted date, and we expect that the new hotel won't open until later this year. Construction progress on Wynn Palace is behind schedule for the 25 June contracted opening date; during the Company's earnings call, chairman Steve Wynn said that the Company is working with the contractor to get them to catch up and that the contractor believes they'll make the June 25th date, but that it's possible they could be late. Also, the Wynn Palace hotel won't be completed until sometime later this year. Previously, on 19 November, the Company announced that it was notified by its contractor that it would not have the casino ready for opening until 25 June, 2016, a full quarter later than had previously been expected. See the last page for disclaimer Page 3 of 9

4 The Company expects to save US$39 million on Wynn Palace. Due to the later than previously expected opening of Wynn Palace, the Company does not intend to pay its construction contractor, Leighton Contractors (Asia), a US$38 million bonus. Moreover, Leighton is obligated to pay Wynn Macau around HK$8 million in penalty fees by Feb for not completing certain milestones on time. We revise up the Company's 2015 to 2017 adjusted property EBITDA forecasts by 2.4%, 7.3% and 9.9%, respectively, on higher forecasted revenue. Even with the lowest VIP win rate since 1Q12, Wynn Macau's 4Q15 total operating revenue was 9.6% higher than we had expected. We increase revenue forecasts by 2.0%, 10.0% and 15.0%, respectively. However, the higher revenue is partially offset by slightly lower forecasted EBITDA margins in 2016 and 2017 since 4Q15 operating expenses, and staff costs in particular, were higher than we had expected. We forecast adjusted property EBITDA of HK$5,505 million, HK$6,058 million and HK$7,124 million, respectively, representing growth of -43.7%, 10.1% and 17.6%. We forecast EPS of HK$0.459, HK$0.350 and HK$0.289, respectively, representing growth of -63.1%, -23.8% and -17.2%. With the opening of Wynn Palace in June 2016, we expect adjusted property EBITDA to increase in 2016 and However, we expect 2016 and 2017 net income and EPS to decrease as depreciation expense increases. Table-2: Forecast Update HK$ million Old New % Change (Except ADR & RevPAR) 2015F 2016F 2017F 2015F 2016F 2017F 2015F 2016F 2017F VIP VIP turnover 433, , , , , , % 16.5% 22.0% VIP gross win 12,662 12,136 13,185 12,856 14,136 16, % 16.5% 22.0% Win rate (% of turnover) 2.92% 2.85% 2.85% 2.87% 2.85% 2.85% (0.1) ppt 0.0 ppt (0.0) ppt Mass Tables Mass market gross win 7,332 8,766 10,145 7,374 8,827 10, % 0.7% 5.5% Slot Machines Slot machine handle 28,493 39,538 51,516 30,701 47,240 66, % 19.5% 29.8% Slot machine gross win 1,391 1,951 2,541 1,482 2,225 3, % 14.1% 23.9% Win rate (% of turnover) 4.88% 4.93% 4.93% 4.83% 4.71% 4.71% (0.1) ppt (0.2) ppt (0.2) ppt Commissions & discounts (3,890) (4,094) (4,448) (3,829) (4,244) (4,828) (1.6%) 3.7% 8.5% Casino revenue (net) 17,495 18,759 21,423 17,882 20,944 25, % 11.7% 17.2% Average Occupancy Rate 96.4% 95.9% 95.9% 96.5% 95.9% 95.9% 0.1 ppt 0.0 ppt 0.0 ppt Adjusted ADR (HK$) 2,485 2,358 2,242 2,503 2,631 2, % 11.6% 26.5% Adjusted RevPAR (HK$) 2,398 2,261 2,150 2,418 2,523 2, % 11.6% 26.5% Non-casino rev. (net) 1,222 1,569 1,874 1,209 1,409 1,685 (1.1%) (10.2%) (10.1%) Total revenues (net) 18,717 20,328 23,297 19,090 22,354 26, % 10.0% 15.0% Operating profit 3,004 2,417 1,599 3,000 2,568 2,214 (0.1%) 6.3% 38.5% Operating profit margin 16.0% 11.9% 6.9% 15.7% 11.5% 8.3% (0.3) ppt (0.4) ppt 1.4 ppt Adjusted property EBITDA 5,375 5,645 6,483 5,505 6,058 7, % 7.3% 9.9% Adj. property EBITDA margin 28.7% 27.8% 27.8% 28.8% 27.1% 26.6% 0.1 ppt (0.7) ppt (1.2) ppt Net profit 2,331 1, ,381 1,817 1, % 8.7% 68.0% Net profit margin 12.5% 8.2% 3.8% 12.5% 8.1% 5.6% 0.0 ppt (0.1) ppt 1.8 ppt EPS, basic (HK$) % 8.7% 68.0% EPS, diluted (HK$) % 8.7% 68.0% Source: Guotai Junan International. See the last page for disclaimer Page 4 of 9

5 Table-3: Wynn Macau Quarterly Forecast HK$ million 1Q15A 2Q15A 3Q15F 4Q15A 1Q16F 2Q16F 3Q16F 4Q16F VIP Segment Number of VIP tables (avg.) VIP turnover 132, ,438 94, , , ,274 96,210 86,589 VIP gross win 3,711 3,517 3,002 2,626 2,886 2,886 2,742 2,468 Win rate (% of turnover) 2.80% 2.92% 3.17% 2.60% 2.85% 2.85% 2.85% 2.85% Mass Segment Number of Mass tables (avg.) Mass market gross win 2,167 1,616 1,819 1,772 1,776 1,776 1,687 1,519 Slot Machines Number of slot machines (end period) Slot machine handle 8,058 7,965 6,391 8,287 7,893 7,893 7,498 6,749 Slot machine gross win Win rate (% of turnover) 4.60% 4.98% 5.08% 4.71% 4.71% 4.71% 4.71% 4.71% Commissions & discounts (1,111) (1,048) (910) (760) (866) (866) (823) (741) Casino revenue (net) 5,138 4,481 4,235 4,028 4,168 4,168 3,959 3,563 Hotel Rooms (end period) 1,008 1,008 1,008 1,008 1,008 1,008 1,008 1,008 Average Occupancy Rate 97.5% 96.4% 95.9% 96.3% 95.9% 95.9% 95.9% 95.9% Adjusted ADR (HK$) 2,565 2,488 2,457 2,503 2,557 2,606 2,655 2,705 Adjusted RevPAR (HK$) 2,503 2,403 2,356 2,410 2,452 2,499 2,546 2,594 Adjusted room revenue Promotional allowance (376) (354) (355) (366) (366) (375) (384) (394) Room Revenue (net) Food and beverage (net) Retail and other (net) Non-Casino Revenue (net) Total Operating Revenues (Net) 5,467 4,782 4,535 4,306 4,437 4,435 4,218 3,798 YOY CHANGE VIP Gross Win (52.3%) (41.3%) (44.5%) (41.6%) (22.2%) (17.9%) (8.7%) (6.0%) Mass Gross Win (7.0%) (33.0%) (28.4%) (8.3%) (18.0%) 9.9% (7.2%) (14.3%) Slot Gross Win (31.2%) (22.6%) (43.1%) (10.0%) 0.4% (6.2%) 8.8% (18.6%) Commissions (52.8%) (43.8%) (42.6%) (42.6%) (22.0%) (17.3%) (9.6%) (2.5%) Casino rev. (net) (38.1%) (36.5%) (38.9%) (27.2%) (18.9%) (7.0%) (6.5%) (11.5%) Non-casino revenue (net) (31.3%) (24.7%) (21.2%) (24.5%) (18.3%) (11.4%) (13.7%) (15.8%) Total Operating Revenues (Net) (37.7%) (35.8%) (38.0%) (27.0%) (18.8%) (7.3%) (7.0%) (11.8%) Source: the Company, Guotai Junan International. See the last page for disclaimer Page 5 of 9

6 We upgrade Wynn Macau s investment rating from "Neutral" to Accumulate and increase our target price from HK$9.30 to HK$ Wynn Macau has historically focused on the VIP segment, which has been suffering more severely than the mass segment since the sector downturn began. However, we think that the Company's current depressed share price fails to reflect that Wynn Macau is becoming more mass oriented as it shifts gaming tables and resources toward this more profitable segment; most recently in 4Q15, the Company derived 40.3% of casino revenue from mass tables and slots, up from just 34.5% in 4Q14, and we think this ratio will continue to increase going forward. Our target price of HK$12.00 is equivalent to 17.9x/16.1x/13.7x 2015/2016/2017 EV/adjusted property EBITDA and is also equivalent to 26.2x/34.3x/41.5x 2015/2016/2017 PE. Our target price is a 21.5% discount to our DCF derived NAV per share of HK$ Table-4: Gaming Sector Peers Comparison Company Stock Crncy Price M-Cap PE EV/EBITDA PB ROE Code mil Hist Avg Current Hist Avg 15F 15F 15F (HK$) Fwd Fwd 15F 16F (%) Fwd Fwd 15F 16F 17F (%) Macau Operators Galaxy Entertain 27 HK HKD , Melco Crown-Adr MPEL US USD , Mgm China 2282 HK HKD , Sands China Ltd 1928 HK HKD , Sjm Holdings Ltd 880 HK HKD , Wynn Macau Ltd 1128 HK HKD , Simple Average Weighted Average USA Operators Boyd Gaming Corp BYD US USD , Caesars Entertai CZR US USD , n.a (0.3) 0.2 Isle Of Capri ISLE US USD , Las Vegas Sands LVS US USD , Mgm Resorts Inte MGM US USD , n.a Penn Natl Gaming PENN US USD , Simple Average Weighted Average Other - Listed Genting Singapor GENS SP SGD , Genting Malaysia GENM MK MYR , Bloomberry Res BLOOM PM PHP , n.a Belle Corp BEL PM PHP , Simple Average Weighted Average Source: Bloomberg, Guotai Junan International. Table-5: DCF Valuation Risk Free Rate 1.58% Sum of PV FCFF (HK$ mn) 40,848 Market Return 12.38% + PV Terminal Value (HK$ mn) 61,639 Market Risk Premium 10.80% Enterprise Value (HK$ mn) 102,487 Adj. Beta Net Debt/(cash) (HK$ mn) 22,929 Equity Discount Rate 12.38% Equity Value (HK$ mn) 79,558 Shares Outstanding (mn) 5,203 After Tax Cost of Debt 3.2% NAV per share (HK$) D/(D+E) 60.0% E/(D+E) 40.0% WACC 6.9% Long term growth rate 3.0% Source: Bloomberg, the Company, Guotai Junan International. See the last page for disclaimer Page 6 of 9

7 Financial Statements & Ratios Income Statement Year end Dec. (HK$ mn) 2013A 2014A 2015F 2016F 2017F Casino 29,536 27,788 17,882 20,944 25,111 Rooms Food & Beverage Retail & Other 1,501 1, ,001 Revenue (Net) 31,341 29,445 19,090 22,354 26,796 YoY 10.2% (6.0%) (35.2%) 17.1% 19.9% Gaming Tax & Premium (15,144) (13,885) (8,698) (9,994) (11,982) Staff Costs (2,351) (2,885) (3,125) (4,205) (5,041) Other Operating Expenses (5,105) (4,626) (3,229) (3,633) (4,150) D&A (919) (986) (1,014) (1,942) (3,398) Property Charges, Other (10) (97) (23) (12) (12) Total Operating Expenses (23,529) (22,479) (16,090) (19,786) (24,582) Operating Profit 7,812 6,966 3,000 2,568 2,214 YoY 16.6% (10.8%) (56.9%) (14.4%) (13.8%) Finance Revenues Finance Costs (347) (599) (606) (756) (712) ForEX Differences 29 (6) Other 110 (34) (64) 0 0 Profit Before Tax 7,716 6,469 2,388 1,823 1,511 Income Tax Expense (15) (24) (7) (5) (4) Net Profit 7,701 6,445 2,381 1,817 1,507 YoY 19.6% (16.3%) (63.1%) (23.7%) (17.1%) Adjusted Property EBITDA 10,271 9,756 5,505 6,058 7,124 YoY 13.4% (5.0%) (43.7%) 10.1% 17.6% Basic EPS (HK$) YoY 19.6% (16.3%) (63.1%) (23.8%) (17.2%) Diluted EPS (HK$) Balance Sheet As at Dec. 31 (HK$ mn) 2013A 2014A 2015F 2016F 2017F P&E and Construction 11,159 19,195 31,996 31,929 30,406 Land Lease 2,071 1,975 1,879 1,783 1,686 Goodwill Other Total Non-Current Assets 13,872 22,161 34,793 34,648 33,053 Investments Inventories Receivables Other 2, ,116 1,905 2,749 Cash & Equiv. 14,130 10,790 2,362 3,071 2,109 Total Current Assets 17,037 11,989 3,968 5,550 5,547 Total Assets 30,909 34,150 38,761 40,198 38,600 Accounts Payable 1,810 2,009 1,302 1,525 1,828 Land Premium Payable Other Payables & Accruals 6,585 4,972 3,224 3,775 4,525 Other Total Current Liabilities 8,949 7,418 4,742 5,505 6,582 Loans & Borrowings 11,683 18,605 26,000 26,000 23,000 Land Premium Payable Other Payables & Accruals Other Total Non Current Liabilities 12,747 19,688 26,665 26,671 23,657 Total Liabilities 21,696 27,106 31,407 32,176 30,239 Shareholders' Equity 9,213 7,044 7,354 8,022 8,360 BPS (HK$) See the last page for disclaimer Page 7 of 9

8 Cash Flow Statement Year end Dec. (HK$ mn) 2013A 2014A 2015F 2016F 2017F Profit Before Tax 7,716 6,469 2,388 1,823 1,511 Depreciation (1,110) 1,846 3,302 Amortization Doubtful Accounts Provision 34 (25) Finance Costs (net) Other Adjustments (94) Working Cap Adjust. 1,715 (2,377) (2,402) Cash from Operations 10,525 5,758 (331) 5,323 6,722 Increase in Restricted Cash (782) 1,543 (800) (800) (800) P&E (3,442) (8,312) (11,730) (1,818) (1,818) Other Cash from Investing (3,567) (6,552) (12,460) (2,583) (2,584) Borrowing (net) 6,203 6,895 7,395 0 (3,000) Payments (304) (280) (298) (298) (298) Dividends Paid (9,026) (8,716) (2,077) (1,181) (1,206) Other (200) (437) (670) (551) (597) Cash from Financing (3,327) (2,538) 4,351 (2,031) (5,100) Effect of For-Ex, net 24 (9) Net Change in Cash 3,655 (3,341) (8,428) 710 (962) Year End Cash Equivalents 14,130 10,790 2,362 3,071 2,109 Ratios 2013A 2014A 2015F 2016F 2017F Margins Effective Gaming Tax Rate 51.3% 50.0% 48.6% 47.7% 47.7% Operating Margin 24.9% 23.7% 15.7% 11.5% 8.3% Net Profit Margin 24.6% 21.9% 12.5% 8.1% 5.6% Adj. EBITDA Margin 32.8% 33.1% 28.8% 27.1% 26.6% Return Ratios ROA 28.2% 19.8% 6.5% 4.6% 3.8% ROE 78.1% 79.3% 33.1% 23.6% 18.4% Return on Capital Employed 42.4% 29.9% 10.2% 7.6% 6.8% Return on Invested Capital 2.8% -21.1% 4.1% 4.7% 3.6% Liquidity & Leverage Leverage (ie., Gearing) 118.5% 228.9% 361.2% 338.2% 280.8% Net Gearing net cash 96.1% 328.4% 298.2% 255.0% Interest Coverage Ratio % % 534.8% 344.5% 315.2% Current Ratio 190.4% 161.6% 83.7% 100.8% 84.3% Source: the Company, Guotai Junan International. See the last page for disclaimer Page 8 of 9

9 Company Rating Definition The Benchmark: Hong Kong Hang Seng Index Time Horizon: 6 to 18 months Rating Definition Buy Relative Performance >15%; or the fundamental outlook of the company or sector is favorable. Accumulate Relative Performance is 5% to 15%; or the fundamental outlook of the company or sector is favorable. Neutral Relative Performance is -5% to 5%; or the fundamental outlook of the company or sector is neutral. Reduce Relative Performance is -5% to -15%; or the fundamental outlook of the company or sector is unfavorable. Sell Relative Performance <-15%; or the fundamental outlook of the company or sector is unfavorable. Sector Rating Definition The Benchmark: Hong Kong Hang Seng Index Time Horizon: 6 to 18 months Rating Definition Outperform Relative Performance >5%; or the fundamental outlook of the sector is favorable. Neutral Relative Performance is -5% to 5%; or the fundamental outlook of the sector is neutral. Underperform Relative Performance <-5%; or the fundamental outlook of the sector is unfavorable. DISCLOSURE OF INTERESTS (1) The Analysts and their associates do not serve as an officer of the issuer mentioned in this Research Report. (2) The Analysts and their associates do not have any financial interests in relation to the issuer mentioned in this Research Report. (3) Except for SMI Holdings Group Limited (00198 HK), Guangshen Railway Company Limited-H shares (00525 HK), China All Access (Holdings) Limited (00633 HK), Guotai Junan International Holdings Limited (01788 HK), Binhai Investment Company Limited (02886 HK) and Link Holdings Limited (08237 HK), Guotai Junan and its group companies do not hold equal to or more than 1% of the market capitalization of the issuer mentioned in this Research Report. (4) Guotai Junan and its group companies have not had investment banking relationships with the issuer mentioned in this Research Report within the preceding 12 months. DISCLAIMER This Research Report does not constitute an invitation or offer to acquire, purchase or subscribe for securities by Guotai Junan Securities (Hong Kong) Limited ("Guotai Junan"). Guotai Junan and its group companies may do business that relates to companies covered in research reports, including investment banking, investment services and etc. (for example, the placing agent, lead manager, sponsor, underwriter or invest proprietarily). Any opinions expressed in this report may differ or be contrary to opinions or investment strategies expressed orally or in written form by sales persons, dealers and other professional executives of Guotai Junan group of companies. Any opinions expressed in this report may differ or be contrary to opinions or investment decisions made by the asset management and investment banking groups of Guotai Junan. Though best effort has been made to ensure the accuracy of the information and data contained in this Research Report, Guotai Junan does not guarantee the accuracy and completeness of the information and data herein. This Research Report may contain some forward-looking estimates and forecasts derived from the assumptions of the future political and economic conditions with inherently unpredic table and mutable situation, so uncertainty may contain. Investors should understand and comprehend the investment objectives and its related risks, and where necessary consult their own financial advisers prior to any investment decision. This Research Report is not directed at, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in any jurisdiction where such distribution, publication, availability or use would be contrary to applicable law or regulation or which would subject Guotai Junan and its group companies to any registration or licensing requirement within such jurisdiction Guotai Junan Securities (Hong Kong) Limited. All Rights Reserved. 27/F., Low Block, Grand Millennium Plaza, 181 Queen s Road Central, Hong Kong. Tel.: (852) Fax: (852) Website: See the last page for disclaimer Page 9 of 9